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Following is the unofficial transcript of a CNBC interview with IMF Deputy Managing Director David Lipton today on CNBC’s “Squawk Box.” Following is the link to the video on

All references must be sourced to CNBC.

STEVE LIESMAN: Hey Becky, thanks very much. Viewers-- put your seatbelts on. We're goin' around the world in about-- four minutes or so. We've got the-- first deputy managing director of the International Monetary Fund, David Lipton with us. David, thanks for joining us.

DAVID LIPTON: Nice to be here. We meet in all the nicest places.

STEVE LIESMAN: We do. We do, don't we. Let's start off with an overview of the global economy. How weak? What are the challenges?

DAVID LIPTON: Well, this-- recovery continues to be a rocky one. Maybe not as rocky as the mountains behind us, but-- you know, I think-- we believe that with two provisos that the U.S. manages not to go over the fiscal cliff again-- to use the mountain analogy, but also if Europe is able to plug ahead with-- dealing with its problems, we see growth continuing, albeit with somewhat slower than historical growth in the advanced economies. And really quite comfortable growth in the emerging markets.

But of course the big risks are the fiscal cliff and Europe dealing with its problems. And in particular-- well, both of those could cause problems for the United States, Europe and spillovers that would widely affect the rest of the world.

STEVE LIESMAN: The managing director of the IMF has not been shy about saying that Europe needs to do more. It needs a bigger firewall. It needs to step up and use its own resources. What is the state of play of that right now? Do you feel like Europe is getting close to-- having the policies-- that address the current problems rather than what people have criticized, the previous problems?

DAVID LIPTON: In a nutshell, Europe's taken some decisions. And what they have to do now is-- implement those and figure out exactly how they're gonna do that. These are very complicated matters. But their problems are to make sure that they can dispel the doubts about the viability of the euro, doubts that people and markets have.

And secondly that they can-- see that growth recovers and continues as a basis for doing all the other things that they need to do. And what this really requires is certain of the peripheral countries have their own problems to deal with, whether it's about budgets and debt-- restoring-- growth, dealing with competitiveness, but there are a number of things Europe has to do to create an environment in which all of that can happen.

Europe needs to-- show the direction that-- the European experiment is going. How they will complete the monetary union. And Europe needs to deal with the-- failure or problems of the-- monetary transition mechanism to make sure that a monetary policy can be supportive of growth. And Europe needs to make sure that its banks are able to be-- supportive of growth as time goes on.

STEVE LIESMAN: Does is it sound like Mario Draghi has been proposing when it comes to the ECB buying the debt of sovereign nations-- who are applying to the EFSF or to the rescue fund who have those programs? Is that sufficient involvement by the ECB there?

DAVID LIPTON: I think the-- that the idea is conceptually right on target. Clearly the monetary transmission mechanism has been impaired. The high interest rates in-- in those countries-- threaten the sovereigns. Create this inter-linkage between the sovereigns and the banks.

And it also means that-- for all the efforts the ECB is making to provide accommodations those are effective in the northern countries but not effective in the periphery. So the growth is not able to benefit appropriately. So I think he's barking up the right tree he's got the right idea, the right approach. And he needs the conditions under which his actions can be-- effective. He needs the countries of the periphery to be doing what they need to do and then he can act.

STEVE LIESMAN: One of the criticisms I've heard of the IMF inside the room from some people is that it is overly emphasizing austerity when it comes to Greece. And that the-- under the austerity that's mandated under the programs, Greece cannot grow. And that this is too harsh on the country. What’s your reaction to that?

DAVID LIPTON: Look, we-- make-- we are working together to help Greece with our Troika partners and we come to-- approaches-- all together. There's been a lot of discussion about the appropriate pace of adjustments. The-- of course the limits to austerity is finance. If you're gonna have less austerity and have a slower path of adjustment there has to be more finance.

And this has been a balancing act over the two year period. An approach was tried. Then an approach was tried where there was the private sector involvement. And-we-- you know, we've seen-- what's-- where-- where Greece stands right now. Greece is trying to find ways to put its program back on track. We have a mission heading out there-- next week to help them do that. We believe that-- the prime minister, the finance minister, are dedicated to-- finding an appropriate path for-- adjustment. Getting things-- back on track. And we're trying to help.

STEVE LIESMAN: You're optimistic about--

DAVID LIPTON: I'm optimistic--in the sense that I think they're working hard. They wanna stay in the euro zone. They wanna get their-- country going again. And I'm optimistic because the prime minister's gone around Europe and he's-- just this week. And he's seen leaders. And-- you know, Ms. Merkel came out of the meeting and said-- "I have trust in this man," and-- expressed-- her support that-- Greece stay in the euro zone. So--

STEVE LIESMAN: Bunch of more countries to visit, David. I wanna move on.


STEVE LIESMAN: The-- one of the number one questions I get all the time is first of all how--do you believe the data in China? And two is how severe is the slowdown there? And what kind of response do you expect from China?

DAVID LIPTON: I remember visiting-- China in the '90s and hearing the deputy premier, Jiron Ji (PH), say that he didn't believe the data in China. So I think-- you know, it's-- and he's explained, it's a complex, huge country. Many-- regions providing information.

I think one has to look at all the data, look at-- the official data, look at supporting information like electricity and transport of-- materials and see whether there's consistency. We believe there's been some slowdown. We've been projecting 8% growth. It's lower than historically so. Recently there have been some further signs of slowdown, so we're reassessing.

STEVE LIESMAN: The managing director was just in the Middle East or-- just talking about the Middle East. The IMF is ready to do programs, especially in Egypt to begin with. Talk about what-- the IMF could be doing there.

DAVID LIPTON: Well, this is a historic opportunity and transformation. And the Middle East has had the misfortune or the bad luck to be going through this transformation at a time when the global economy's in trouble. And in Eastern Europe they didn't have that-- adversity.

We're trying to help the countries stabilize because part of the tumult has been that-- there are doubts and uncertainties and so on. You look at Tunisia. They're making huge progress. We are working with Egypt. The managing director saw the president of Egypt in Egypt last week. We are talking to them about an IMF program. We're hoping we can help them stabilize.

And then over time-- all the countries that are going through these changes need help from-- the U.S., Europe, the Gulf countries. They need investment. They need trade. Just like in Eastern Europe it took a few years-- for-- this to start to work and for businesses to be willing to come in. We're trying to help them provide the foundation for that later-- more important growth days.

STEVE LIESMAN: Okay. David, that was a great-- overview of the world and-- join us again to--


STEVE LIESMAN: --to do an overview again.

DAVID LIPTON: Good to talk to you.

STEVE LIESMAN: Guys-- back to you from Jackson Hole.

HOST: All right. Senior economist, Steve Liesman.

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