Tags: imf | europe | crisis

Strauss-Kahn: Europe Needs Crisis Plan Now

Thursday, 16 Dec 2010 12:40 PM

European Union leaders need to design a “comprehensive” plan to address budget and banking woes in early 2011 to curb the debt crisis, International Monetary Fund Managing Director Dominique Strauss-Kahn said.

When asked how much leaders will accomplish in Brussels talks this week, the IMF chief responded “not much.” In an interview scheduled to air tonight on the “Charlie Rose” show on PBS, Strauss-Kahn said European Union leaders need more time to overcome the “piecemeal approach” they have used for Ireland and Greece and come up with a broad solution.

“Unless the leaders in Europe will provide something like this, markets will still believe that after one country comes another one, and then it skips to another one, and it will never end,” Strauss-Kahn said. “So the real need now is to have a big plan, which I think is possible.”

EU leaders are beginning a two-day summit today to discuss a proposed crisis-management mechanism to contain debt shocks and possibly make more flexible use of the EU’s 750 billion euro ($1 trillion) emergency fund. Portuguese, Greek and Spanish bonds slipped today as German officials have continued to press for bondholders to help bear the cost of future debt restructuring.

Strauss-Kahn said Spain’s biggest banks are “relatively safe,” with problems concentrated in a small number of lenders. The situation is “manageable” and not “as bad as they say,” he said.

Eurobonds

European leaders need to defer any discussion of centrally issued eurobonds until after the crisis is contained, he said. In the short run, countries that have the fiscal room to spend more to help their economies should act to shore up the economic recovery, he said.

“I would say the real problem for the eurozone is growth,” according to Strauss-Kahn.

He said Greece is attempting to get its budget policies in order after “decades” of poor management and probably has built enough consensus to move forward amid ongoing public opposition. “I guess they will succeed,” he said.

In the U.S., the Federal Reserve’s so-called quantitative easing strategy “will help” the economy grow faster even though it also has drawbacks, Strauss-Kahn said. He said maintaining growth in the world’s leading economy needs to be the “main concern,” for policy makers around the world.

Chinese Currency

Strauss-Kahn also called for a gradual appreciation of the Chinese yuan that would allow China’s economy to adjust over time. A sudden move would be “disturbing” to the Chinese and world economy, he said.

“Those asking for immediate revaluation of the renminbi are in my view are probably wrong,” according to the IMF chief, using the formal name for China’s currency.

When asked whether he would consider running for the French presidency in 2012, he responded “I’m too busy to think about it.” Strauss-Kahn, a Socialist, said his priority now is focusing on the global financial crisis and his current role at the IMF.
 

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European Union leaders need to design a comprehensive plan to address budget and banking woes in early 2011 to curb the debt crisis, International Monetary Fund Managing Director Dominique Strauss-Kahn said. When asked how much leaders will accomplish in Brussels talks...
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Thursday, 16 Dec 2010 12:40 PM
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