IMF: “The economic crisis is extremely serious”


Source: El Mostrador - Chile, 23/03/2009

The last forecast of the organism speaking of a contraction of the world economy of between 0,5 and 1 per cent, which means “a global recession” and the first regression in the last 50 years.

The managing director of the International Monetary Fund, Dominique Strauss-Kahn, warned that these financial crises are very serious, and called for global, urgent and coordinated policies.

Strauss-Khan participated in the Board of Directors of the International Labor Organization (ILO), and before government officials, employers and employees, highlighting “the urgency of the situation”.

"We need the right policies that allow the world to move forward, and we need it now," he said.

The managing director recalled that the last forecast of the IMF was due to a contraction in the world economy of between 0,5 per cent and 1 per cent, which means “a global recession”, and the first regression in the last 50 years .

I also pointed out that “rich countries will be badly affected” is the worst situation in which emerging countries and poorest nations have been.

"It is a reality that the funding in poor countries will go away, which will lead to millions of poverty, and it will be possible to mitigate democracies, degenerate into conflicts, may even end in wars," said Strauss, concerned -Khan.

The international official recalled that according to World Bank data, 46 million people could join the ranks of poverty.

Despite this situation, Strauss-Kahn considers that recovery is possible in 2010, if and when certain requirements are applied.

Most importantly, according to the managing director, the financial sector is to be restored.

“I understand the sentiments of the world in the sector, because that was what caused all of this, but it was the companies that had the most resources, the exporters too, and the possibility of buying a house. A financial system that works correctly is essential for the economy to work ”.

An act that followed suggested that demand be stimulated, “because monetary policies have left their limits”.

Likewise, Strauss-Khan said that the recapitalization of emerging and poor countries is essential.

“During these countries, the capital inflows did not have a deficit and could not be financed. The IMF goes to help, but this policy must change and if it is necessary to rebuild the model to live with less capital ”.

“I have to make sure that the world changes. New savings for new circumstances, ”he added.

With respect to the wide plains, Struss-Khan said that there is a need to regulate and supervise the financial sector: “how to avoid this regulation”.

In relation to macroeconomics, the managing director considers that central banks will not be able to continue “simply controlling inflation”, a bell that must really control the market “and avoid the creation of buzz”.

Finally, Strauss-Khan pleaded for a “world economy most effective and with the presence of emerging countries, with more legitimacy”.

"If the crisis is global, it needs global institutions, but I am not referring to a large organization that would be more bureaucracy, but greater cooperation between existing institutions".

In connection with the next G20 meeting, on April 2 in London, Strauss-Khan said that he hopes “that the road will be better”.

“But let's not get involved, and that won't be what will bring us out of the crisis. We are not supervising the classification agencies that we are going to solve the problems of a man who runs the risk of falling without a problem ”.