“That part of the world can address some of its issues,” she said. But “the crisis is sufficiently acute that it is going to be felt, and we are seeing it in all regions. . . . The risks are all over the map.”
Lagarde’s comments come as the agency undertakes a sensitive discussion about how to boost the emergency funding it can provide Europe without seeming to underwrite this relatively wealthy part of the world. Many officials, including some in the Obama administration, argue that Europe can afford to tend to its own problems. Lagarde has not said how much more funding she would like the agency to make available to Europe.
The debate promises to intensify during the U.S. election campaign, with a pending increase in the agency’s finances under attack by congressional Republicans skeptical of IMF involvement in Europe.
The issue demonstrates the fine line the former French finance minister has had to walk in her first months at the agency as she tries to reconcile the trudging political machinery of her home region with demands from elsewhere for Europe to do more, faster, to help itself.
Taking over after the arrest of her predecessor, Dominique Strauss-Kahn, on sexual assault charges, Lagarde said the transition was less difficult than she expected. The charges against Strauss-Kahn were dropped, but Lagarde had worried that the trauma would continue for the agency.
But people were ready “to turn the page and move on,” she said. “In that sense, the healing was not a painful or lengthy exercise. . . . We don’t talk about it. Next chapter.”
Policy, however, has proven tumultuous. Lagarde has overseen a shift in the IMF’s approach toward Europe that has led to clashes with some of her former European colleagues on such key issues as bank regulation. This evolution in approach has arguably drawn her closer to U.S. recommendations for the region.
The fund, in particular, took a harder line toward Greece, strengthened the case for having private investors in Greek bonds take deeper losses
and adopting a stricter tone toward Greek political leaders, who were lagging on promised reforms. There were disagreements within the agency over the best approach, and the head of the IMF’s European division, who opposed the change, soon departed.
“We had to be forthcoming and perfectly honest about our numbers and analysis,” Lagarde said. Documents prepared for an October summit in Brussels, for example, gave European leaders the stark choice of funneling more of their taxpayers’ money to Greece or imposing deep losses on banks and other investors in Greek bonds.