The international response to the economic crisis is good in terms of monetary and fiscal policy, but more must be done on cross-border regulation of finance, IMF Managing Director Dominique Strauss-Kahn said on Friday. On a visit to Austria, he commended the way the world's main central banks had responded and co-operated and he broadly backed the fiscal response by governments, saying both should ensure "the Great Recession" did not become another Great Depression.
Strauss-Kahn said recovery depended crucially on cleaning up the mess at banks loaded with assets that turned toxic since the crisis in the US subprime mortgage market snowballed into something far bigger in 2007. "I'm happy to say that there are green shoots everywhere, glimmers of hope, like President Obama says, that's true," he told a news conference.
But there were still other negative forces at work, he said, highlighting the need to restore bank confidence in order to restore normal lending. "You never recover until the cleansing ... has been done." While saying he was generally happy with the macroeconomic response from central banks and governments, Strauss-Kahn cautioned against complacency and said a lot more co-operation and co-ordination is needed internationally to make cross-border financial market operations safer.
"This crisis is not yet over, and there will, in all likelihood, be further tests ahead," Strauss-Kahn said in a speech, the text of which was distributed by the International Monetary Fund. The IMF predicts global gross domestic product will fall 1.3 percent this year in the first world recession since the Great Depression of the 1930s.
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