G.O.O.D

Source: AFP

The IMF’s chief economist has warned that the global financial crisis is set to worsen and that the situation will not improve until 2010, a report said Saturday.

Olivier Blanchard also warned that the institution does not have the funds to solve every economic problem.

“The worst is yet to come,” Blanchard said in an interview with the Finanz und Wirtschaft newspaper, adding that “a lot of time is needed before the situation becomes normal.”

He said economic growth would not kick in until 2010 and it will take another year before the global financial situation became normal again.

The International Monetary Fund on Friday promised to help Latvia deal with its economic crisis after it assisted Iceland, Hungary, Ukraine, Serbia and Pakistan.

But Blanchard said the IMF was not able to solve all financial issues, in particular problems of liquidity.

Withdrawals of capital leading to problems of liquidity “can be so significant that the IMF alone cannot counter them,” he said, adding that massive withdrawals of investments from emerging countries could represent “hundreds of billions of dollars.

“We do not have this money. We never had it,” he said.

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From FT.com / World

Government intervention at a global level is required to tackle the credit crisis, according to the head of the International Monetary Fund, who has warned that market turmoil will take a serious toll on world growth.

Dominique Strauss-Kahn, IMF managing director, told the FT: “I really think that the need for public intervention is becoming more evident.”

From CNN Money

PARIS (AP) — The collapse of a Wall Street institution over the weekend shows the global financial crisis is broader than policy makers realized and it is growing worse, the head of the International Monetary Fund said Monday.

“The financial crisis which started in the United States is more serious and more global than it was a few weeks ago,” IMF Chief Dominique Strauss-Kahn said in Paris.

“The risks and dangers are very high. The economic environment is still worsening.”

The current crises will require a “global answer,” Strauss-Kahn said.

recession, despreesion, collapse, IMF

From the FT

Governments might have to intervene with taxpayers’ money to shore up the financial system and prevent a “downward credit spiral” from taking hold, the International Monetary Fund said on Wednesday.

Mr Lipsky said: “I fully recognise an appropriate role for public sector intervention after market solutions have been exhausted.”

He urged policymakers to “think the unthinkable” and prepare now for what they would do if the worst case scenarios materialised and “low probability but high impact events” threatened to jeopardise global financial stability.

Mr Lipsky warned: “The risks of further escalation of this crisis are rising and decisive policy action will be needed.”

He said this crisis was different from recent past crises because both the financial markets and the banking system “have faltered simultaneously”. The first priority had to be to reverse the “spreading strains” in global financial markets and restore the functioning of the financial system in advanced economies.

Mr Lipsky said there should be no let up in the pressure on financial institutions to disclose losses but said pressure to deleverage “needs to be kept orderly”.

He also urged banks to recapitalise to avoid shrinking their balance sheet.

IMF, recession