Define a leader with four characteristics to have a soul, to have a heart, to have brains and to have good nerves. Leaders, by and large, dont get to choose the challenges they face. They only get to choose how they address those challenges. And how youve done so in your time at the imf has been remarkable. We look forward to hearing your opening comments today madam lagarde, on the state of the Global Economy and how we might best address its most pressing challenges. We at the Atlantic Council often speak of how we together as the Atlantic Community alongside our likeminded global friends confront a defining moment in history, perhaps as pivotal as 1919, 1945 or 1989 when the decisions of leaders like yourself, and that of the member countries you represent, have outsized importance. So as i turn the podium to you, let me paraphrase clause schwab in thanking you formakering all the personal sacrifices that Public Service requires at such challenging times and using his words, salute your soul your brain, your heart, and your nerves. Madam lagarde. Of well thank you so much fred. And i know youre a true friend because youre one of the very few who introduced me without referring to my muscles. Because people typically refer to my belonging to the synchronized Swimming National team in france. So thank you for that. And dont believe that fred and i always coordinate our colors. But it so happens that we are black and white together. The council, fred, Board Members and members in the audience, is renowned for its capacity to actually bring together Top International policymakers from both sides of the atlantic, and from further afar. And this is clearly something that is in common between our two organizations. The Atlantic Council and the International Monetary fund. Next week we will be hosting the spring meetings of the world bank and the imf and we will be welcoming to washington, d. C. Representatives of our 188 member countries. Finance ministers, governors of Central Banks and they will focus their discussion on the state of the Global Economy. Since our last annual meeting in october, there have been a lot of developments on the global scene. I would say that it has first of all, inherited from a big shot in the arm as a result of the decline of oil prices. In addition to that, it has had the benefit of a strong Economic Performance by the largest economy in the world the United States of america. And overall we would say that Macro Economic risks have decreased. So the Global Recovery continues, but it is moderate and uneven. Global recovery continues, but it is moderate and uneven. In too many parts of the world it is not Strong Enough and in too many parts of the world, people dont just feel it. In addition to that, if Macro Economic risks have declined, financial and geopolitical risks have increased. It is not that overall growth is bad. 3. 4 in 2014 . It is not bad. It is actually in line with the average growth that we have had in the last three decades. So whats not so good about it . What makes it moderate and uneven. Well, it is rather that given the lingering impact of the Great Recession on people it is actually generating hardship for many people around the world, including those countries where more than 50 of the youth population goes unemployed. So growth is not good enough. Six months ago i warned about the risk of a new mediocre. New mediocre, low growth for a long time. Now today what we must do is avoid that new mediocre becomes the new reality. We can do better, and we must do better. That great atlanticist, John Fitzgerald kennedy, once said, and i quote there are risks and costs to action, but they are far less than the longrange risks of comfortable inaction. So comfortable inaction is what must be avoided. And thats what i would like to focus on. How to lift growth today by using all available tools and policy space available. How to lift tomorrows growth and prevent that new mediocre from becoming the new reality. And how do we Work Together to strengthen the International Financial system foster development, and make growth more inclusive and actually sustainable. Let me begin with a quick health check of the Global Economy. Now those who follow the imf know that the World Economic outlook will be publish next week so im not going to focus on numbers. They become to the World Economic outlook. Im going to talk about the broader trends and policy recommendations. As i indicated earlier growth remains and we forecast it to remain moderate. Roughly, roughly the same as last year. Advanced economies are doing slightly better than last year. As youll note, the recovery is firming up in the United States and the United Kingdom and the eurozone is doing slightly better, as well and is promising. But if we look at the emerging and developing economies theyre doing slightly worse than last year with lower commodities being the driver. And while they still represent and probably will continue to represent about 70 of Global Growth this year, theres tremendous diversity within that group. Do you remember the talk about the brics . Well picture has changed. And if india is a growth bright spot in that group, china is slowing, although its growth is certainly more sustainable. Subsaharan africa continues to perform strongly but russia is experiencing economic difficulties. Brazil is stagnateing, at best. And many parts of the middle east are beset by political and economic turmoil. So we should not think of emerging economies as just one single group. Each country faces very specific circumstances, some of them easier, some of them more difficult. So what does it imply in terms of policies . With overall growth moderate the Global Economy continues to face a number of significant challenges. There is, for instance, what i have called last year the lowlow highhigh risk. Low uninflation low growth, high unenemployment and that exists for a number of economies. Clearly all policy space an levers must be utilized and it begins with demand support. Hows that implemented. Well, first of all, continued Monetary Policy accommodation is needed especially in the euro area and in japan. Fiscal policy needs to be calibrated to the strength of the recovery without ever losing sight of debt sustainability. But the effectiveness of those support measures can be significantly improved because theyve been at work for some of them, for a little while. They can be improved. For example, unclogging the channels through which monetary easing and fiscal policy work in the euro area. How . Well effective insolvancy frame works to deal with the total stock of no less than 900 billion euros of nonperforming loans that is blocking credit channels. In japan, the authorities need to sustain momentum of the second and the third arrows one is Fiscal Consolidation the other is structural reform in that country is going to take the full benefit of the first arrow which was indeed monetary easing in order to lift both growth and inflation. Third way of being more efficient, by leveraging Lower Oil Prices to reduce energy subsidies, emerging and developing Oil Importers could save, on average, a full 1 of gdp in 2015 alone and those resources could be put to better use in order to invest in infrastructure, in education, in health. So those are some of the Macro Economic dimensions. As ive said, Macro Economic risks are decreased. What has increased on the other hand is the risks posed by the financial dimension. Financial stability is more at risk now than it was six months ago. The new mediocre that i talked about, that new mediocre growth is not a comfortable place with respect to Financial Stability. Financial risks have migrated. For example, they have migrated from banks which are far more regulated and better supervised and heavily tested, to nonbanks. They have migrated from advanced economies towards emerging markets. Lets go through a few of those risks. For one, there are adverse side effects of the very low or even negative, as we clearly saw, including on the primary market today, very low, if not negative Interest Rates caused by otherwise necessary accommodative monetary policies. These foster a higher risk tolerance on the part of investors which can lead to overpricing. And if the low interest environment persists it can create sol create solvancy challenges for life insurers an pension benefit fund. So the purpose of these policies is to actually kickstart growth. But if it was to last longer then it puts some of those Business Models at risk. Or think of another one, the Wide Movement of Exchange Rates that we have observed recently. For the past six months, the u. S. Dollar has appreciated against a basket of major currencies by 12 in real terms. Now some countries with more difficult Macro Economic conditions and less policy space have of course benefited from the relative depreciation of their currencies. In others, large amounts of dollar denominated or foreign currency denominated debt. These dramatic swings can be destabilizing and this is particularly the case for corporates in the emerging market economies that are wedged between a strong u. S. Dollar on one hand lower Commodity Prices on the other hand, and with my third hand higher borrowing rates. On the top of which they might not have hedged. And that is a bit of an uncertainty where we have little information. Now these risks taken individually the ones that ive just mentioned could be manageable, but we also have to contend with a structural decline in market liquidity. It is a risk that we had flagged about six months ago. And this is due primarily to recent changes in the structure of the Asset Management industry in advanced economies which have created a mismatch between the maturity of assets and of liabilities, which means that liquidity could evaporate quite quickly if everyone rushes to the exit at the same time which could make for a bumpy road when the Federal Reserve begins to raise shortterm rates. So this new configuration of Financial Risks underscore the importance of strengthening financial policies. At the global level, it means ensuring market liquidity during times of stress improving macro and microprudential policies for nonbanks in particular and following through on the Regulatory Reform agenda particularly the too big to fail institutions. At the country level it mean curtailing excessive risk taking and managing existing vulnerabilities vulnerabilities. And again, while the appropriate menu of measures must be specific, the overall set of policies can help us to lift growth today. So much so for growth today. As i said moderate uneven, but recovery under way. But what about growth tomorrow. And thats a big issue. Because growth tomorrow, as we analyze the potential for growth, is also moderate. In both advanced and emerging economies, potential growth is being pared down. And this largely reflects several factors. One is lasting scars from the financial crisis that the world experienced few years back now. And probably scars that we had underestimated. But also the undercurrents of changing demographics and lower productivity. So to prevent the new mediocre from becoming that new reality, strk turl reforms need to go hand in hand with Macro Economic and financial policies to raise confidence an generate investment. And frankly, whether you look around, there are too many countries that talk about structure reforms but dont actually do Structural Reforms at the depth, at the speed where they should be done. And Structural Reforms really span a wide range of policies. Some reforms have immediate effect. Most reforms have more mediumterm effect and take a bit longer to bear fruit. Ill give you an example of one i wouldnt call it a reform, but it is a set of measures which requires often reforms and a bit of creativity around ppps, for instance. But some reforms are right at the intersection of what can actually have an effect in the short term and will certainly improve productiveity in the medium to long term. Our own Research Shows that boosting efficient Infrastructure Investment with be a powerful emimpetus for growth both in the short term you stimulate activity construction sites starts employing people. And in the long run, you improve infrastructure, you make sure people and goods can actually travel properly. Other reforms, such as that affect the labor product and Services Market are likely to unfold positive result over a longerterm horizon. Yet they are essential to enhance productivity and innovation which, in turn can be powerful antidotes. To the impact of something that we can no the do anything about and that is affecting all of us aging. Weve done a bit of research not so much on aging. Other people can do that a little better than us. But weve done some research on Structural Reforms and weve tried to flesh out priorities and payoffs in Labor Force Participation and trade. Let me take them very quickly one after the other. Lets look at productivity growth. Reversing that decline in advanced economies requires lowering barriers to entry in product and Services Market. Our Research Shows, for instance, that improving the allocation of labor and capital across sectors can significantly increase total factor productivity, tfp, as its call. Another example is the potential benefit from improving access to finance for smaller businesses. You know everybody talks about smes. We have to encourage smes. Well, of course. Of course. Because they generally most countries, certainly the advanced economies but also now to a much larger extent in emerging market economies they represent most of the employment and they represent the largest number of companies. Well unfortunately if we look at europe, for instance they also hold a share of nonperforming loans that is 50 higher, on average than larger corporations. So clearly putting the Small Business sector on firmer footer would yield a big payoff. This is same story in china. Where Small Businesses play Critical Role in the economy in terms of output, employment, tax revenue and innovations. And where access to financing is extremely difficult. I discuss that matter with the Prime Minister of china and it is one of the angles that they want to use in order to stimulate activity by the corporate world. If we look at emerging market economies such as indonesia, and russia they can read productivity by easing investment limits and improving the business climate. Countries like brazil, india, south africa, they should certainly focus on reforming the education, labor and product markets. And in lowincome countries, as well as in the middle east and central asia, improving governance eradicating corruption, or trying to as well as Financial Inclusion will help lay the foundation of a thriving private sector. So thats for the productivity improvement as far as capital and investment is concerned. If we look at labor now. There is an important set of measures that is needed to remove barriers to Labor Force Participation, and that is key to tackle inequality and ensuring a broadbased growth. Ill give you a few for instances. In japan and in the euro area, too many tax disincentives exist. And where a change of tax policies that would be more growth friendly, more labor supportive would be very welcome. And there could be budget neutral neutral. In too many countries legal inequities still exist. And what do they do . They create barriers to greater participation by women in the economy. Weve done a very interesting study, and from all the countries that weve studied 90 90 still had legal inequities in the books that prevent access of women to the labor market. And as we know closing the gender gap which is one of the goals of g20 only by 25 a little 25 . Over the next decade could actually result in the creation of 100 million jobs. Now that means something for both growth and poverty reduction. And finally, on trade, there are potentially huge global gains to be had from further trade reform and integration. As we know trade has been a major driver of economic progress over the past three decades, and yet again in 2015, and for the fourth year now, trade will be below average trade in terms of growth. Recent efforts have been welcome. The bali agreement which was a subset of the doha long expected nonagreement could a