Threat of global economic collapse over for now: International Monetary Fund

Manufacturers might want to breathe a small sigh of relief: according to International Monetary Fund chief Christine Lagarde, the threat of financial collapse in the global economy appears to have eased.

But Lagarde warned that developed economies still need to follow through on financial reforms and debt reduction.

“We stopped the collapse. We should avoid the relapse. And it’s not time to relax,” she said in a press conference on her outlook for 2013.

Lagarde said that big economic powers, including the U.S. and European countries, had taken important steps to shore up their financial systems but have a lot of work left to do. She warned against a waning commitment to regulate the financial sector, despite the severe problems that began with the collapse of U.S. financial institutions in 2008.

According to Lagarde, reforms have been delayed and diluted, and she worries that banks are pushing back against necessary reforms. In Europe, Lagarde said, there has been real progress on reform: the European Union has a lot of new tools to deal with financial crisis, although the EU still has work to do on its banking union in order to prevent future problems.

On Greece, which has seen the most acute collapse of all the EU countries and which many believed would have to leave the currency union, Lagarde said recent reforms appeared to have restored confidence.