Financial Crisis Is Too Big for Developed World to Cope, Ex-IMF Head Says
John Simpson
“Unusual problems require unconventional solutions,” Witteveen wrote in an opinion piece in the Financial Times today. “The world’s financial system is threatened by a new crisis that could be even worse than that of 2008.” He was IMF managing director from 1973 to 1978.
Renewed signs of economic weakness globally and the downgrading of U.S. debt by Standard & Poor’s have rekindled concern about the quality of government borrowing, especially in Europe. Slumping confidence has wiped $8 trillion from the value of equities in four weeks.
The leaders of euro zone nations have done everything politically feasible to counter the crisis, while the European Central Bank and the U.S. Federal Reserve are close to the limit of their capabilities, Witteveen said. A new fund could tap the currency reserves of China, Japan, the Middle East and European nations such as Germany, he said.
It “would allow the fund to borrow large amounts from all surplus countries and so provide temporary financing even for a big country such as Italy,” the former official said.
To contact the reporter on this story: John Simpson in Toronto at jsimpson12@bloomberg.net
To contact the editor responsible for this story: Paul Panckhurst at ppanckhurst@bloomberg.net
http://www.bloomberg.com/news/2011-08-23/crisis-too-big-for-developed-world-ex-imf-head.html
Aug. 22, 2011