IMF sees no risk of global ‘currency war’

MILAN: International Monetary Fund Managing Director Christine Lagarde said the positions of U.S. President Donald Trump’s administration were unlikely to trigger a currency war, an Italian newspaper reported on Tuesday. “We see no such risks,” Lagarde told daily la Repubblica.

She also urged Italy’s next government to be fiscally responsible and understand that “revenues are just as important as expenditures.”

“Those who govern understand the risk of creating instability,” she said.

Meanwhile, during a speech in Berlin on Monday, Ms Lagarde said: “A more unified euro area can be a compass to prosperity for the region and a beacon of hope to the world.”

The IMF chief said the euro zone has made progress on a capital-markets and banking union, two areas in which the fund is calling for greater integration. But she also encouraged the currency union’s members to push toward setting up a “central fiscal capacity” that would establish a “rainy-day fund” that members finance through annual contributions.

With the UK leaving the European Union, Ms Lagarde’s proposal comes as Germany, France and other members debate how to strengthen the 19-country euro zone. While the notion of a central fiscal authority is “politically difficult”, monetary policy did too much of the “heavy lifting” during the last financial crisis and budget austerity worsened the problem, Ms Lagarde said.