Lagarde warns against false sense of economic security

International Monetary Fund (IMF) Managing Director Christine Lagarde on Sunday urged policy makers to be vigilant as oil prices, debt levels, and the risk of slowing growth in emerging markets threaten global economic stability. "Optimism should not give us a sense of comfort or lull us into a false sense of security," Lagarde said in Beijing at the China Development Forum. "The global economy may be on a path to recovery, but there is not a great deal of room for manoeuvre and no room for policy mistakes," explained Lagarde. The IMF Chief urged the developed countries to strengthen their financial systems and cope with high debt, while noting that the developing countries need to improve their financial defenses. "The world economy has stepped back from the brink and we have causes to be a little bit more optimistic," she said. "But optimism should not give us a sense of comfort and certainly should not lull us into a false sense of security." She said European leaders need to stay vigilant about debt, focus on "steady, rigorous implementation" of financial measures, and carefully watch the economic situation in Greece. The IMF last week approved a 28 billion-euro ($36.6 billion) loan for Greece as part of a 130 billion euro second bailout by the European Union that requires more austerity and an overhaul of its economy. Greece completed the world’s largest sovereign-debt overhaul and agreed to deeper spending cuts to obtain new funds as it faces a fifth year of recession. "The measures that were proposed are ambitious and it will be important to focus on steady rigorous implementation of the situation on the ground," Lagarde said about Greece.