Olivier Blanchard IMF 311.
(photo credit: REUTERS/Handout)
The global economy should be in good shape despite ongoing turmoil in Europe and
the United States, three of the world’s leading economists said Sunday at a
business conference in Tel Aviv.
International Monetary Fund chief economist
Oliver Blanchard, Goldman Sachs Asset Management chairman Jim O’Neill and
McKinsey & Company managing director Dominic Barton participated in a panel
hosted by CNN’s Richard Quest at the annual Globes Israel Business Conference in
Blanchard said the decisions made by European leaders in the
past month, including a deal struck in Brussels last week, made him more
optimistic than before.
“The first step is to make sure the countries
really have plans to control their debt,” he said. “The choice of government in
Italy is very important, but the next step is to make sure they can do it, and
that’s where the ‘bazooka option’ comes in,” he said, referring to the prospect
of aggressive European Central Bank action in the bonds market.
impression about what Europe is doing – and this is where the IMF can help – is
to build a bazooka piece by piece. We’re not far from something which looks like
European leaders agreed in Brussels on Friday to draft a new
treaty for deeper euro-zone economic integration, although Britain, the region’s
thirdlargest economy, refused to join the 17 euro states and nine other EU
countries in the fiscal union.
“I’m actually more optimistic than I was a
month ago. I think there has been progress,” Blanchard said. “What
happened last week is important; it’s part of the solution, but it’s not the
Asked whether diverse statements from policy makers in Europe
were causing volatility in markets, he said: “A lot of the volatility is coming
from statements from Europe, showing the range of opinions and inability to get
to a logical decision process.”
O’Neill disagreed with Blanchard’s
assessment, saying the ECB might need to do more than promised in Brussels to
solve the crisis. Europe’s troubles were not reflective of the entire global
economy, he said, adding that in the next year the four BRIC countries (Brazil,
Russia, India and China) would collectively create the equivalent of another
Italy in dollar terms.
“You’d think with what’s being said in the media,
that the world was already in recession,” O’Neill said. “This year the
world [economy] will have grown at 5 percent, and next year it will be 3.5
percent or more.”
“The most important news on a truly global basis last
week was not the bungled euro deal,” he said. “It was the fact Chinese inflation
dropped to 4.2% [in November] from 5.5% [the previous month]. The problem in
Europe isn’t really a debt crisis; it’s a crisis about the structure and
leadership of the EU.”
Although most of the discussion focused on the
global economy, the panelists were also asked to comment on Israel, and all
agreed it was functioning well compared to the rest of the world.
think many countries around the world would be happy to have such a growth rate,
especially in the developed part of the OECD,” Barton said. “The only thing I
would say is that it’s imperative that Israel be linked up to these BRIC and
African markets in a significant way.”Reuters contributed to this