19 December 2011

FT: Strauss-Kahn sees 'growth crisis' in Europe

Dominique Strauss-Kahn, the former head of the International Monetary Fund, made a return to public life on Monday, warning European leaders that they were in denial about the Continent's economic crisis and have only weeks to come up with real solutions.

Mr Strauss-Kahn spoke for nearly an hour about the problems plaguing the global economy. He sounded as on top of matters as when he was IMF chief, but dispensed with diplomatic niceties in diagnosing Europe’s woes. “It appears today as a debt crisis. More than that, it is a growth crisis. Behind the growth crisis is a leadership crisis”, he said.

He singled out Germany and France, saying that the history of the European Union proved the two countries needed to cooperate closely if there was to be any progress, but that the current leaders were not on the same page. “The problem is that they don’t have exactly the same view and I’m not quite sure that Merkel and Sarkozy clearly understand each other”, he said.

He said that European leaders had consistently underestimated the severity of the financial crisis and made repeated mistakes in focusing on cutting debt at the expense of growth. “The problem is that they are still in denial”, he said.

Mr Strauss-Kahn was dismissive of the European summit in Brussels earlier this month, saying it was “another of the kind bleeding away, day by day, the remaining confidence investors may have in politicians”. He said leaders had failed to undertake any of the fundamental reforms needed to put the eurozone back on track – there was no fiscal union, no lender of last resort, no expansion of monetary policy and no changes in structural policy.

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