By Steven K. Beckner

MEXICO CITY (MNI) – No matter who is elected president of the
United States Tuesday, he must immediately come to grips with a “fiscal
cliff” that threatens not just the U.S. economy, but that of the whole
world, Christine Lagarde, managing director of the International
Monetary Fund said Monday.

The United States has had a bright red budgetary target on its back
throughout these meetings, and Lagarde was not shy about joining in the
criticism of the U.S. for its fiscal stand-off.

Before even taking questions after the G20 meeting, she said “it
will be important for the U.S. to address quickly the so-called fiscal
cliff,” because “the global economic context remains difficult and the
fragile recovery remains at risk if the needed policy actions are not
implemented.”

Lagarde said “time is of the essence, and significant policy
uncertainty in Washington must be addressed.”

She also said Japan must “quickly articulate a course of action” on
its fiscal situation and said “Europe, in turn, remains a challenge
globally and must deliver on its policy commitments to assure a more
stable euro zone.”

But it was the United States that got most of her attention as she
met with reporters.

Declining to say who among the candidates – President Obama or
challenger Mitt Romney — would best deal with the automatic tax hikes
and spending cuts due to hit in January, Lagarde said, “whoever is going
to be elected or reelected will be faced with that challenge and will
have to tackle that issue up front very shortly.”

“The beginning of 2013 is in two months time, when solutions have
to be found,” she noted. “It’s in the interest of the U.S. economy, the
Mexican economy, the Canadian economy and much more broadly” to resolve
the fiscal cliff.

Otherwise many countries “will suffer from the spillover.”

Lagarde, who has often urged continued monetary accommodation by
the industrialized nations, had little to say about monetary policy, but
said inflation, when allowed to get out of control, always hurts the
poor the most.

“So monetary policy that uses as a target inflation goals or
inflation bands in our view is appropriate to make sure that is
avoided,” she said.

Lagarde said the IMF is “fully engaged” with Greece and is working
to “find a comprehensive solution that addresses the economic future of
that country.”

She said any deal must include “fiscal commitments, structural
reforms, financial and sustainability.” And she said “everybody … who
is focused on those issues are working hard” to achieve such a package.

Lagarde cautioned a reporter not to lump Italy and Spain in with
Greece, observing that “Italy will be in primary surplus next year.”

She said the IMF has recently reached bilateral loan agreements
with Mexico and other nations to “create a $461 billion global firewall
that puts the IMF in a better position to help its 188 member countries
restore sounder economic and financial conditions worldwide.” And she
said at least another $100 billion in such agreements are pending.

She said the IMF’s total lending resources of more than $1 trillion
are adequate for now.

** MNI – Mexico City **

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