 I have now the pleasure to introduce someone who actually doesn't have to be introduced, Christine Lagarde, Managing Director of the International Monetary Fund. Christine, over the past days the question I have been asked the most is what does the annual meeting seem of resilient dynamism mean? Well, I could have made my answer simple and could have said it's Christine Lagarde who best embodies the theme. Your private sector experience both in Europe and in the United States has brought you to the pinnacle of your profession as managing partner of one of the largest law firms in the world. You have always understood that while growth is important it must also be built on a solid foundation where the private sector plays an important role. Since assuming taking the helm of the IMF you have been steadfast in your message that while economic stabilization and growth is vital it must be established on a basis that is inclusive and able to withstand unexpected shocks and externalities. While some views seem resilient dynamism as perhaps contradictory, in fact it simply reflects that success is built on a complex and interconnected basis that combines a strong bold vision with the ability to adapt tactics according to circumstances as you have demonstrated many times since you have taken on your new role. Even going back to your days as a synchronized swimmer, swimming champion, participating in world competitions, an experience which you have said taught you how to hold your breath and work in collaboration with others, synchronized swimming, you have always represented the spirit of dynamism. We are very grateful that you join us this evening at the eve of our meeting to provide us with a framework for the global economic outlook. Please, Christine. Excellencies, distinguished guests, ladies and gentlemen, friends, good evening. My friend, Klaus, I would like to thank you very much for giving me the opportunity of this very moment addressing you and this audience. And for what you have given me, I would like to actually give that moment to two young ladies. I would like to dedicate this moment to Malalai, the daughter of Pakistan and her sister, the daughter of India. And I will talk to specific points related to both of them. Now, you would expect me tonight to address you about the state of the global economy. Where do we stand? Where do we go? You would probably expect me to comment on the latest numbers that have been released a few hours ago in Washington by our chief economist in the latest revision of the world economic outlook. 3.5% for 2013, about 5.5% for the emerging market and 1.5% for the advanced economies. You would probably expect me to comment on a little quote that was picked up by the press when I gave the first press conference of 2013. We have avoided the collapse. Let's beware of the relapse and let's not relax. You would expect me to explain why I think that 2013 will be a make or break here. And you would probably expect me to desecrate this dynamic resilience or resilient dynamism, which include the concept of keeping up the momentum. What does that mean, keeping up the momentum? Well, keeping up the momentum as far as the euro area is concerned means making sure that what has been built to a great extent thanks to brave gentlemen of the caliber of Mario Monti, brave women as well, be actually made operational. That the banking union, soon to be followed we hope by the fiscal union, be better embodied. That fiscal consolidation, however painful but necessary in some corners, be continued and that clear focus be put on growth and creation of jobs. Keep up the momentum means for the United States of America trying to avoid the avoidable policy mistakes, such as failing to agree on the debt ceiling or failing to agree yet again on the budget. For Japan and the United States not reaching an agreement on mid-term objectives, particularly when it comes to debt reduction. Keep up the momentum for the emerging economies faring better, although quite concerned about the inability of the advanced economies to come to some rapid conclusions are facing different situations depending on their status. But keeping the momentum for them means rebuilding the buffers that they had to use up during the time of the crisis which has helped them. And those are clearly the short-term priorities as we see them, as I see them. But to refer to my friend Mario Monti, I'd like to just take a break away from the short term from what needs to be done in 2013. And here in Davos, given that I have the privilege of addressing you, try to take a broader view, look at a longer horizon to the new global economy taking shape before our eyes. Over the past few months, I have visited all of the major emerging market regions of the world. Africa, Mr. President, Asia, the Middle East, Latin America. And I have to say that the world looks very different from their vantage point. And it's a world of challenges, yes, but it's also a world of resilient dynamism. Now, the burning question is for them just as for the leaders and the policymakers for the advanced economies, how can we make sure that all regions grow strongly, converge rapidly, and more importantly, that it succeeds in meeting the people's aspiration? I'm not sure that I can provide the answer. But I think to try to address that answer, we have to look at some of the mega trends that are shaping the future and then try to identify what key aspirations, key values, key principles drive the younger generation. You've said to me many times, Klaus, that when you lose hope, you turn to the younger people, to the young leaders, and find faith again. So I think we need to hear from them what those aspirations are, what those principles and values drive them. Turning to the mega trends for a moment, I know that they're all discussed at the World Economic Forum this week, but I would like to just take out four of them, which I believe are relevant as far as economic policies are concerned going forward. The first one is a growing demand for individual empowerment, including that of women, and a growing sense of a global community. And I don't think that the two are mutually exclusive. Individual empowerment and a growing sense of a single global community. A threat, yet an opportunity at the same time. Second, a reallocation of political and economic power across the world. By 2025, not very long from now, two-thirds of the world's population will live in Asia, two-thirds. Now, this can lead to greater cooperation or to greater tension and competition. Third, a seismic shift in demographics as the youth bulge in various emerging regions will rub up against the growing populations elsewhere, including in emerging market economies such as China. When you look at numbers, 60% of the population in the Middle East and North Africa is under 30. In Sub-Saharan Africa, it's not 60%, it's 70%. Again, great opportunity or source of instability. And the fourth mega trend is this increasing vulnerability from resource scarcity and climate change with the potential to unravel the economic development. And this is really the wild card in the game. So how can we successfully navigate our way into this future world? As you suggested, for renewed optimism, turn to the young. And they expect clearly a different world, a different economy, in a flatter, more closely knit and more interconnected world than ever before in history. This new generation thinks differently. It's a generation we end on immediacy, democracy and the global reach of social media. Consider a few numbers for a second. Facebook and Twitter have about 1 billion and 500 million followers. If you were to rank these constituencies by countries, there would be third and fourth nations in the world. Now, perhaps we can lay the groundwork for future success by embracing some of those principles, values and aspirations of the young people. And I would like to focus on three of them. One is openness, the second is inclusiveness, and the third one is accountability. Let me begin with openness. Global generation and an open generation, as I've just mentioned. In a sense, this is an old lesson for a new era. If you consider the circumstances and the reasons why some of the United Nations institutions, including the IMF, were set up, it was precisely for that. To encourage cooperation, to transcend the national interests and to come together for the global good when everybody wins. And in fact, this principle is even more important nowadays than it was then. In this era of globalization, cooperation needs to be high-wided in the psyche of policymakers. Why? Because as we saw very clearly during the crisis, this is a world where economic hardship will be contagious and will contaminate the rest of the world, all the other regions, in next to no time. In a flat world, there is no economic silos, there is nowhere to hide. Now, if we look at openness and we see that the situation is improving, you can be absolutely sure that nation will revert to their natural tendency of hiding behind their borders, of moving towards protectionism, of listening to vested interests and will forget about transcending those national priorities. Yet, it is not the way to go. The way to go has been clearly demonstrated by numbers, by the way in which it has lifted so many people out of poverty is about openness, is about removing barriers, is about improving exchanges. And I'm here thinking clearly about trade and about financial integration. Let us look at Asia, for instance. When you observe the trade within Asia, in the last 10 years it has tripled and the number is even higher in emerging Asian countries. This has benefited the people of Asia. Good trade integration, yet not enough financial integration because it is not investing enough of its own saving into its own future. Yet the financial integration, as we know it, would benefit the population, would increase access to funding, would help financial inclusion, would provide more insurance against adverse developments and shocks. Other regions can benefit from that integration as well. If you look, for instance, at the Middle East and Africa, these regions will gain from opening up, knocking down barriers in trade and welcoming investment. In this way, they can set in train a virtuous circle of higher productivity and enhanced economic diversity and greater resilience against external turmoil. This is being discussed as we speak. The Maghreb countries are discussing a mutual code of investment. The Arab countries have just agreed a couple of days ago to have a free trade zone amongst themselves. Take the Maghreb countries, for instance. If you look at any one of them, they're small. If you put them together, they represent 90 million people and quite a significant market, offering many possibilities. But possibly the greatest integration, the greatest dream in that respect actually comes from Europe. If you look behind the daily headlines related to the eurozone crisis, you see a region in the midst of a historic process of integration, United Kingdom included. It is really the culmination of a centuries-long search for peace and prosperity with the understanding that by linking arms, there were unlocking arms and unlocking multiple avenues for people to benefit from mutual gain. Yes, of course. The European economy faces multiple challenges, serious issues that need to be addressed. Deeper banking union, deeper fiscal union, for example, as beautifully described earlier by Mario Monti. But destiny pecans through the smoke and the fog. And I, for one, am optimistic about Europe's future, especially if it embraces the concept of resilient dynamism, of keeping the momentum. What they have done in the last 18 months is remarkable. And it's not just the other Mario. He's done a great deal, there is no question about it. But the governments have actually changed the picture, changed the perception as reflected by spreads and yields indicated by Mario Monti. They need to keep at it and they need to challenge the conventional wisdom according to which, when things get better, they relax. No, it's not time to relax. Now let me now turn to my second point. I see that as a major aspiration of a new generation and the new global economy, stronger inclusion. You've heard it over and over. What does it mean? We live in a participatory world where the young generation expects tolerance, respect, fairness, and opportunities. Let's just look at a few examples. From the yearnings on the Arab streets for greater dignity and opportunity, to the brave cry of a young woman for education and equality, to the heartfelt urge for justice and respect from the Indian woman, these demands must be met. Now what does it mean in terms of economic policy? Well, it begins with growth. But it has multiple dimensions and I'll come to them in a minute. But it's not any growth, as you've heard many times. It's growth that actually benefits all, where all can actually benefit from prosperity, where the economic adjustment, when necessary, can be borne by all so that the burden is fairly shared. I would like to quote Franklin Roosevelt at this point. He once said, the test of our progress is not whether we add more to the abundance of those who have much, but it is whether we provide enough for those who have too little. Inclusive growth, wherever I have been in the last 18 months, is one of the top priorities of policymakers. So I'm not surprised, Klaus, that in the most recent survey by the World Economic Forum, the top concern, the top risk, was severe income disparity. You said it yourself. Excessive inequality is corrosive to growth. It is corrosive to society. We, nor policymakers, have not paid enough attention to inequality. Now, all of us, including at the IMF, thanks to research that was conducted recently, have a better understanding that a more equal distribution of income allows for more economic stability, more sustained economic growth, and healthier societies with stronger bonds of cohesion and trust. This research is confirmed by findings. It is referred to by many dignitaries and academics, actually. What is less clear is how you achieve that inclusive growth. I would certainly, for myself, put universal access to education as an unconditional, not negotiable starting point. Beyond that, I believe that you should also add the social safety nets that we advocate in many instances, including in countries that have programs. And in some cases, minimum wages can also help. Now, above all, inclusive growth will be tested against the asset test of unemployment. As we know from the latest ILO numbers, there is currently in the world 202 million people looking for a job. And two in five of the jobless are under 24. Now, if we have any priority, it is that one. Because that will actually achieve a lot of the other objectives that we have. But as I said, inclusion has other dimensions than just growth. Gender inclusion is critically important, and, frankly, too often neglected by policymakers. And I wish there were more men to actually argue that case of gender inclusion. In today's world, it is no longer acceptable to block women from achieving their potential. Think about this. Women control 70% of global consumer spending. 50% of cars are bought by women. 50% of computers are bought by women. And 85% of all other consumer goods are bought by women. This is not the top of the pyramid, as one said before. It's the market. And all studies point to the economic benefits of full female participation in the labor force, in the economy, in society. One recent study estimates that by simply raising simply, if it was that simple, but by simply raising women's employment rates to the level of men, GDP would jump significantly. By 5% in the US, 9% in Japan, 10% in South Africa by 2020, and the numbers are even more staggering for India or Egypt, for instance. The evidence is clear. When women do better, economies do better. So policy makers would be better off doing some good for women to make sure that economies actually do better, and they should remove obstacles to the path of women integrating the economy. Second point of inclusion after gender. And that's one that we will hear about over and over, not this year, but next year and the year after. We need a greater sense of solidarity amongst and across generations. We need to be cognizant of the legacy we are living to those who will come after us. Now, one of those legacies is with us at highest levels since the World War II in the advanced economies, 110%, and that is the debt. Average debt to GDP ratio in advanced economies at the moment is at 110%. That's what we leave for the generations to come, and debt is a matter that we will be talking about in the next few years. More important, even than debt, because potentially more detrimental is climate change, which is by far the greatest economic challenge of the 21st century. The science is sobering. The global temperature in 2012 was amongst the hottest since record began in 1880, and we should make no mistake. Without concerted actions, the next generation will be roasted, toasted, fried, and grilled. And it's on us to avoid that. So we need growth. We need green growth. We need growth that is inclusive, that is job creating, and that is gender inclusive. Green growth, that's one of the reasons. I'm so keen that at the IMF we try to get the carbon pricing right and that we push as much as we can the elimination of subsidies for fossil fuel energies. I know how difficult it is, and there are countries here sitting in the front row that have done it courageously, but it's clearly in the interest of the next generation. Let me turn now to my last principle. Better accountability. The new generation demands transparency. They demand good governance, and we must deliver. On that note, I would like to just mention very briefly the role played by new technologies. Enforcing change, enforcing accountability. It was the citizen power of social media that sparked a people's transformation in the Middle East that put pressure on US policymakers to compromise on the fiscal cliff and to prompt Chinese policymakers to actually publish frequent updates of pollution levels. So transparency lays on a very solid ground of information technology. And these forces will only get stronger. Now, of course, governments can try to prevent it, can try to push back and restrict access to information technology, but it's a bit like King Canute ordering the tide not to come in. What does this mean for economic life? Public sector, private sector, international institution. For the public sector, we've learned that good governance is the bedrock of economic success. The example of Qatar was perfect. Without strong institutions, good policies cannot be developed and implemented. If I judge by the number of technical assistance courses that are in demand at the IMF, it's about institution building. It's about making sure that the administrations, the agencies, the policymakers have the strength to actually implement policies. Zero tolerance for corruption must be foundational. The statement must be the servant and not the master of the people. But the public sector is not the only one to have to display good governance. The private sector is in it as well. It cannot be in it just for profit. It has to add value. It has to create jobs. It has to develop new ideas. It has to innovate. It has to move the economy forward. Vested interest, forum shopping, and arbitrage typically hinder this accountability principle. They must be resisted. Now clearly at this point in time, I have in mind the financial sector, which has not been up to it in terms of accountability. Accountability to its clients, to its shareholder, to the taxpayers and to society in general. And as we all know, the global economic crisis, the financial side of the crisis, was in many respects a governance crisis originating in the financial sector. It hid too much activity in murky and dark corners and put its own short-term gain ahead of supporting the real economy. Things are changing. As Plato said, excess generally causes reaction and produces a change in the opposite direction. But we need to see further changes, better changes in 2013, finishing the job of the financial sector reform must be a priority. And yes, we can forever discuss about whether it should be more, whether it should be better, what is the difference between the two. Suffice to say that the job needs to be finished and that uncertainty, that ambiguity about a sector that is clearly different, that has specific interests at stake, that has trust as a key component. That job needs to be finished. And we don't need the weakening in capital and liquidity standards. We don't need the delay in implementation. We don't need the lack of convergence and the differences that are propitious for precisely forum shopping. We need cross-border resolution. We need appropriate supervision and review of shadow banking and derivatives. If I was to name only three areas where progress has to be made. One final point on accountability, the international institutions. Yes, the IMF, like any international agencies, is also and has to be accountable. Accountable to my 188 members, accountable to its citizens, accountable to civil society members and representatives to which we reach out because we want to understand exactly what is their expectations and how we can best serve them. Accountability on the part of the IMF in implementing its governance reform, which is not yet completed and for which we are struggling to get the final members around the table. But we shall deliver. Let me conclude. I believe that if we continue to act and if we can embrace those expectations, principles, and value and keep the momentum in the short term, we will get beyond the crisis. More than that, I believe that we are in the antechamber of a new global economy, marked by rapidly shifting circumstances and new modes of thinking. Yes, this new economy will be geographically different, driven more by the dynamic emerging markets and developing countries. But it will also be generationally different, shaped by different values and principles. What we need today is a new moment in history that embraces the values, principles, and aspirations of a new era. More openness and cooperation between nations. More inclusion and solidarity among people. And stronger accountability of those responsible for the global economy. And that includes many of you in the room. I'm not sure that I've convinced you. I'm not sure that I've identified the path. But I know that together we can actually embrace those values and principles and try to see how it applies to our respective jurisdictions, to our respective constituencies, to our respective companies, to see how we can progress and how we can respond to the daughter of Pakistan, to the daughter of India, and to many others who are expecting changes from us. Thank you. Christine Lagarde. This was a necessary and very fundamental speech, showing us the mega trends. I know there are many questions and we could follow up many of those issues. When I said at the beginning that we have to add to our social responsibility, our moral responsibility, I think it just has to do with such issues like inclusiveness, like intergenerational responsibility which you addressed in your speech. We cannot go into a long discussion, unfortunately, and it might be also wrong. But nevertheless, coming, let's say, looking at the long-term trends which you showed you, Christine, may I just ask some questions which have to do rather with 2013? Very short questions. Where do you see the main risk, the main source of risks which worries you at the moment? Europe, the US, or elsewhere? I would say all advanced economies as a package. I would include Japan, the Euro area, and the United States. And the order in which I mentioned them is not especially relevant, but I think that there are threats on the horizon if those regions or countries do not keep up the momentum. But I think that they have it in their hands to actually transform 2013 in a year of hope rather than a year of despair. But those are the three, you know, clearly key areas of risks. See emerging countries worry you less, Cypriot countries. The emerging countries worry me less because they have, number one, they have buffers for most of them. Number two, they have a growth rate that protects them in a way from, you know, the hardship. They are turning towards more domestically focused models as, you know, time goes on. And they have a reservoir of consumers and growing middle classes that will actually, we hope, protect them from the turmoil that could take place elsewhere. You mentioned at the beginning the new outlook of the IMF for the global economy. Are you disappointed with those figures? What, 3.5 for 2013? It's better than last year. You know, 2012 was 3.2. 2013, we forecast that 3.5. So it's a 10% progress, which is not huge, but it is positive. And the key thing is to keep the momentum as you very wisely indicated with your resilient dynamism or dynamic resilience because clearly, you know, growth has to pick up and develop further. Related to growth, we are seeing some improvements now in market sentiment. If there would be a kind of backlash, what would you see as a consequence, a complete, let's say, return to this era or this feeling of despair which we had last year, or what would be your prognosis? If we do not create very fast real improvement in the economy in growth and jobs, especially? Well, at the moment, we clearly have financial markets expecting improvements and showing some optimism. You see that on the securities market, you see that on the bond market, you see a general financial trend of measured optimism. This is not necessarily matched in the real economy numbers. And that's where we need to build and we need to reinforce the support which has to be coupled in some economies and some markets with fiscal consolidation because it's necessary. But it has to be done at the right pace in order not to strangle the recovery and not to strangle the limited growth that we already see. That dichotomy, I personally hope, is anticipated by the financial markets. They generally have a bit of a vision and they probably expect that the situation will pick up. There will be a base effect as well because many economies that have adjusted, that have taken fiscal consolidation measures, that have taken very deep structural measures to improve their competitiveness will bounce back and will do better. Maybe last question. What do you consider as the biggest challenge for yourself or for the IMF in 2013? Keep the momentum. I think in 2012, we've replenished the coffers of the IMF so that we can respond to the demand wherever it comes from in case of difficulty and we can do so in a flexible way, precautionary or otherwise. I think the challenge will be to actually respond to the demand of the membership, be attentive to where we will be most needed and I can think of the Middle East as one part of the world and the global economy where we have to pay attention going forward. Yeah, those are the challenges and keeping the quality of our work always at the top. And we wish you to keep the momentum and I have to thank you again because I think it was very important at the beginning of our annual meeting to show how fast and how much the world is changing and how much we have to put our thinking and actions in the framework of those new developments which you described so accurately with your four mega changes. So thank you again for joining us. Thank you, Mario Monte Prime Minister. Thank you, Mr. President. Thank you, participants and we wish you a very good meeting over the next four days. Thank you.