In a recent speech in Germany, the head of the International Monetary Fund (Christine Lagarde) (www.imf.org) warned that time is running out to prevent the global economy slipping into a “new mediocre state of low growth that could be hard to reverse”.

Ms Lagarde said that the global economy is not in crisis, but pointed out that “the outlook has darkened over the past six months, while down-side risks have increased”. She also said that the recovery in advanced economies — such
as the UK and the USA — has been weaker than expected, while recessions in Brazil and Russia have been “deeper and more prolonged”.

Speaking in Frankfurt, Ms Lagarde described the recovery as “too slow” and “too fragile”, while “risks to its durability are increasing”.

She said: “Persistent low growth could become self-reinforcing, if policy makers keep delaying action. This has consequences for the social and political fabric in many countries — even in Germany, where the economy has been strong. We can do better, we must do better, but policies must go further, and the policy mix must be more potent.

“Policy makers must avoid retreating into protectionism as countries struggle to cope with the refugee crisis, while dealing with high unemployment and growing inequality. To some, the answer is to look inward, to somehow unwind these linkages, to close borders and retreat into protectionism. As history has told us, time and again, this would be a tragic course. The answer to the reality of our interconnected world is not fragmentation; it is co-operation.”

Ms Lagarde concluded: “Let me be clear: we are on alert, not alarm. There has been a loss of growth momentum. However, if policy makers can confront the challenges and act together, the positive effects on global confidence — and the global economy — will be substantial.”