Euro unlikely to 'vanish' this year: IMF chief

6th January 2012, Comments 0 comments

The euro is unlikely to "vanish" this year, IMF chief Christine Lagarde said Friday, but warned a report this month will show the global economy growing slower than the 4.0 percent estimated in September.

"Will 2012 be the end of the euro currency? My answer is I dont think so," she told a press conference during a visit to South Africa.

"It's a young currency, it's a solid one as well. You have, within the zone, not in relation with the currency, serious pressures and issues concerning the sovereign debt, concerning the strength of the banking system, but the currency itself is not one that would vanish or disappear in 2012."

"Will Greece quit the euro zone in 2012? The euro partners have affirmed, reaffirmed, and reaffirmed their determination. We can only support that," she said.

But she warned that the crisis was taking a toll on Africa and the rest of the world, with the International Monetary Fund set to release a report around January 25 that is likely to lower the global growth forecast.

"We are currently revisiting our world forecast," she said. "It is very likely to be revised downwards."

"We should clearly prepare for a 2012 that will not be a walk in the park, that will not be an easy journey, but will be one of effort and focus on a combination of issues -- the first one, the European crisis and its resolution."

"African countries are a critical part of the global economy," she added, in a nod to her hosts.

"These countries... will suffer setbacks if the Europe crisis is not addressed successfully," she said, after a meeting with South African Finance Minister Pravin Gordhan.

"The IMF is going to be particularly vigilant in respect of anything that looks like financial protectionism," she said.

"We'll join forces with other international institutions to make sure we continue to avoid domestic protection, countries not being concerned by the rest of the world, and not adopting the international cooperative approach, which in our view is absolutely necessary to deal with the current situation."

Lagarde is set to meet with South African President Jacob Zuma on Saturday in the central city of Bloemfontein, where he is taking part in weekend celebration to mark the 100th anniversary of his ruling African National Congress.

South Africa fell into its first recession since the fall of apartheid during the 2008 global financial crisis.

While the recession lasted only nine months, the country has struggled to boost its growth rate to levels that the government says are needed to make a dent in a 25 percent unemployment rate that keeps 38 percent of the population living in poverty.

The rest of Africa escaped the fallout from the 2008 crisis, with many countries posting strong growth on the back of increased trade and investment with Asia, particularly giants China and India.

But Europe remains a critical trade partner for the continent, which is keeping a wary eye on the potential fallout of the eurozone crisis.

The euro on Thursday sank below $1.28 to levels last seen in September 2010, amid ongoing worries about the debt crisis.

The eurozone debt crisis claimed Greece as its first victim in May 2010, with Ireland and then Portugal also needing massive EU and International Monetary Fund bailouts.

As the crisis drags on, speculation has grown that Italy and Spain could be the next member states to need a costly bailout but it is far from clear whether the resources currently available would be enough.

An EU summit last month came up with yet another series of measures to tame the crisis but implementation takes time, with the markets piling on the pressure and showing no patience as Brussels tries to hold the line.

© 2012 AFP

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