IMF Chief Says Yes - No - Yes to East European Calamities

Friday, May 15, 2009

Dominique Strauss-Kahn, managing director of the IMF, tried to square the circle at Austria's central bank major annual macroeconomic summit. Depending on the news source Strauss-Kahn admitted that the IMF overestimated the problems in Central Eastern Europe (CEE) - or not?
Austrian business daily "Wirtschaftsblatt" quoted Austrian central bank governor Ewald Nowotny who said the IMF head had apologized for exaggerating the direness of the situation in CEE according to earlier IMF figures.
"He apologized. The matter is resolved for me,"
Wirtschaftsblatt quoted Nowotny who added that such a human mistake is nevertheless inacceptable.
Strauss-Kahn was quoted, saying "that worst is behind us," but he also said that the economic outlook remained the same. Huh?
The English daily Telegraph emphasized Strauss-Kahns warnings:
Dominique Strauss-Kahn, managing director of the International Monetary Fund (IMF), warned the global downturn was not over and more financial shocks were likely.
Speaking in Vienna on Friday, he said the world was still in the grips of a "Great Recession" and it would be wrong to become complacent.
"This crisis is not yet over, and there will, in all likelihood, be further tests ahead," he said.
Mr Strauss-Kahn said the main reason why the global economy will "almost certainly" avoid a crisis as severe of the 1930s' Great Depression was the co-ordinated action taken by world leaders.
"World leaders embraced multilateralism, and are reaping the rewards. Vehicles like the G-20 were used to coordinate policies and deliver a unified message," he said.
He praised central banks for aggressively cutting interest rates to historic lows in a co-ordinated manner, followed by a leap into the unknown with unconventional measures in its attempts to try and resuscitate markets.
"For most countries, this is uncharted waters - but the fact all were willing to jump in at the same time provided a needed boost to confidence," he said.
Mr Strauss-Kahn said the IMF had played a key role in directing what policy responses were necessary and was "ahead of the curve".
Looking to the future he said that credible and co-ordinated exit policies from the policies put in place during the crisis would be required, as would fiscal tigthening if "serious fiscal problems down the road" were to be avoided.
It doesn't sound all that optimistic to me. Plummeting tax revenues in Europe justify a "when?" and not "if."
Rising unemployment will add to the Burdens in the EU, requiring more spending on social service for the millions falling through the globalization net.


Wikinvest Wire