Economic Crisis To Continue

(Reuters) – THE GLOBAL ECONOMIC CRISIS will continue and countries must do more to adopt financial market regulations, International Monetary Fund Managing Director Dominique Strauss-Kahn told a German magazine today.

‘The global economic crisis will continue, even if Germany and France had some good figures in the second quarter,’ Strauss-Kahn was quoted as saying in an advance copy of an article to be published in Der Spiegel tomorrow.

Strauss-Kahn said he wanted to see more action from nations to curb bankers’ pay and tighten capital requirements in the banking sector.

‘It is right to say that not enough has happened. I hope the Group of 20 meeting in Pittsburgh will bring new momentum,’ he said. Leaders of the G20 meet later this month to try to agree on measures to help stop a repeat of the financial crisis.

Strauss-Kahn said the lesson of the financial crisis was that the market economy needed rules to function.

‘Without new rules, there will be a return to the old behaviour,’ he said.

Governments needed to develop ‘exit strategies’ from the stimulus packages introduced to boost economies, said Strauss-Kahn, adding, however, that it was dangerous to think the crisis was already over.

‘We need such “exit strategies.” We are working on them, but I would disagree with any… demand to think about implementing them now,’ he said.

Asked by the magazine how liquidity that had been pumped onto the markets would be withdrawn, Strauss-Kahn said a combination of higher interest rates and ending direct intervention of central banks would be needed.

He also said the IMF had sufficient resources for now; but that if the body were to take on additional responsibilities to coordinate a financial safety net for countries in financial difficulty, it would need a further financial boost.

… (15/09/2009) – Think Tank Warns Risk Of Repeat Crisis

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IMF Warns Britain’s Soaring Debt Is ‘Testing The Limit’

(Mail) – THE INTERNATIONAL MONETARY FUND (IMF) has delivered its sharpest rebuke yet on the ‘dramatic deterioration’ in Britain’s public finances.

In a major blow to Gordon Brown, the Washington-based fund warned the UK is ‘testing the limit of the market’s confidence’ by pushing the national debt towards 100% of gross domestic product — or close to £1.5 trillion.

If Britain does not do more to tackle public spending, faith in the Government’s ‘solvency’ could be damaged, it said in an economic health check.

That would trigger fears of a collapse in sterling, and a full-blown fiscal meltdown.

The IMF also warned the UK could suffer an economic ‘doubledip,’ where a possible recovery is snuffed out.

House prices have yet to bottom out, despite recent signs of stabilisation, and the outlook for property investment is ‘bleak,’ the fund said.

… (22/07/2009) – Another Warning On Rising Public Borrowing

UK Cannot Afford Another Fiscal Rescue

(Telegraph) – IN CALCULATIONS THAT WILL SPARK FURTHER CRITICISM over the state of the public finances, an IMF paper presented to world’s leaders has laid bare how the UK’s indebtedness has left it unable to provide the vital stimulus the economy could need over the next 18 months.

Every other G20 country, apart from the UK and Argentina, has been able to budget for temporary spending increases or tax cuts next year to help drag their economies out of recession, according to the paper presented to a recent G20 meeting in Basel. Even Germany, whose finance minister, Peer Steinbruck, has accused the UK of ‘crass Keynesianism,’ plans to spend a full 2% of its economic output on such measures next year.

The news underlines the fact that, with Standard & Poor’s having warned recently about the perilous state of the UK accounts, Britain has very little leeway to afford new emergency measures. However, sceptics will warn that it also makes it doubly likely that, in the pre-Budget report this autumn, the Chancellor will announce extra measures to keep Britain in line with its G20 counterparts.

The UK entered the recession with the worst structural budget deficit in the Western world, leaving it with little room to borrow in order to lessen the impact on profits and unemployment. Although the IMF last week said it now expects the British economy to return to growth next year, its calculations over the implications of the deficit underline the fact that any recovery will be tepid.

The Organisation for Economic Cooperation and Development has also made grim predictions about the state of Britain’s public finances. It is forecasting the fiscal deficit next year will climb to 14% of GDP — higher than Ireland or Iceland, and the worst in the industrialised world.

… (13/07/2009) – Tories ‘Will Take Years To Fulfill Tax Pledges’

… (14/07/2009) – UK Cost Of Living Falls Most Since 1948