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Cheaper oil, stronger U.S. growth not enough for global recovery

Staff writer |
The managing director of the IMF, Christine Lagarde, says the debilitating after-effects of the global economic crisis and warned that a steep drop in oil prices and stronger U.S. growth are insufficient to offset the longstanding weakness of Europe and Japan.

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"Let me be blunt: more than six years after the start of the Great Recession, too many people still do not feel the recovery (because) too many countries are still weighed down by the legacies of the financial crisis, including high debt and high unemployment," Christine Lagarde said in a speech at the Council on Foreign Relations, a Washington-based think tank.

Although she welcomed the drop in oil prices and a healthier U.S. economy, Lagarde said those factors are not "a cure for deep-seated weaknesses elsewhere," particularly the Eurozone and Japan.

Lagarde gave her speech just days before the IMF is due to release its latest 2015 global forecast on Jan. 20 in Beijing.

"A shot in the arm is good, but if the global economy is weak on its knees, it’s not going to help," the managing director said, referring to oil prices that have fallen to their lowest levels since 2009.

The Eurozone and Japan are at risk of remaining stuck in a rut of low growth and low inflation, while emerging and developing economies are seeing slower growth rates after having been the locomotive of the global economy in recent years, meaning that the United States "is the only major economy that is likely to buck the trend this year," Lagarde said.

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