IMF Strauss-Kahn - worst news behind us

16 May 2008

While the worst of the financial market crisis itself was probably over, the impact on the real economy would continue at least for the rest of the year IMF Managing Director Dominique Strauss-Kahn said.

While the worst of the financial market crisis itself was probably over, the impact on the real economy would continue at least for the rest of the year IMF Managing Director Dominique Strauss-Kahn said in a meeting with the EP ECON Committee.

 

However, “there is a protracted influence on consumer and investment behaviour from the credit squeeze... that we will have to live with for a while: optimists say until the end of the year, pessimists say mid-2009”, he said.

 

It is a new type of crisis, which means we don't know what type of crisis we will have in the coming years, Strauss-Kahn said. Housing prices in the USA are still going down. There is no sign of stabilisation. If the causes of the crisis are still there, then so are the consequences: bad debts, problems in the financial system and transmission from the financial systems to the real economy.

 

Neither Europe nor the emerging markets are de-coupled from the US economy and cannot therefore avoid the impact of the US slowdown. Though in the case of China and India, growth will still be huge, if slower than before.

 

Questions from Pervenche Berès (PES, FR), Ieke van den Burg (PES, NL) and Margarita Starkevičiūtė(ALDE, LT) focused on financial supervision. Mr Strauss-Kahn said the FSF proposals for reforms in financial market supervision were good ideas, but warned against national answers to a global problem. “If you do not have the same supervision elsewhere, you achieve almost nothing”, he said.

 

EP Press release

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