IMF chief calls for central banks to make financial stability main objective

Managing Director of the International Monetary Fund (IMF) Christine Garde has warned that central banks should make financial stability their main objective as well as keeping inflation low, Portugal's daily newspaper Publico reported on Monday.

"We need to continue to strive for improved prudential frameworks for the financial sector so as not to overburden monetary policy," she said at the opening of the the European Central Bank (ECG) forum launched this weekend in Intra city, some 40 kilometers northwest of Lisbon.

The IMF chief said central banks should guarantee financial stability as well as maintaining price stability, adding that the global financial crisis of 2008 showed that "financial crises can be extremely costly and that the recovery can be excessively long and complex."

Garde also praised the Portuguese for their sacrifices after the debt-laden country ended its 78-billion-euro bailout program on May 17 with troika of international creditors -- the European Union, the International Monetary Fund and the European Central Bank.

Lagarde said Portugal had ended its program "with success" thanks to "great efforts" by the Portuguese, adding that the country was now beginning to "reap the fruits of hard work."

"Today, Portugal looks forward. It is completing its economic reform program successfully, following great efforts, determination and sacrifices carried out by the Portuguese," she said at the opening of the first edition of the ECB forum.

Portugal has had to implement harsh austerity to meet its deficit reduction targets, including tax hikes and spending cuts since it signed a 78-billion-euro bailout with the troika in May 2011.

The debt-laden country has been dubbed "Europe's good pupil" especially after the IMF and EU relaxed the terms of its financial assistance, granting it more time to reduce its public deficit thanks to its compliance record.

However, austerity has caused protests across the country as the Portuguese see their working and living conditions worsen drastically.

Portugal recently emerged from its deepest recession in almost 40 years and ended its program with a "clean exit," however, the government said it won't ease up on its tough reform program and the opposition claims the country is worse off than it was before the bailout.

The European Central Bank Forum ends on Tuesday.