Government intervention at a worldwide level is needed to
address the credit crisis, the head of the International Monetary Fund said on
Monday.
“I really think that the need for public intervention
is becoming more evident,” IMF Managing Director Dominique Strauss-Kahn
told the Financial Times in an interview.
Strauss-Kahn’s comments come just days before world finance
ministers and central bank governors gather in Washington for the meetings of the
IMF and the World Bank, where steps to address the crunch in financial markets
will be discussed.
Strauss-Kahn told the paper that government intervention —
in the securities market, the housing market or the banking sector — would act
as a “third line of defence” to support monetary and fiscal policy.
“Effort has to be made on loan restructuring. With
respect to the banks, if capital buffers cannot be repaired quickly enough by
the private sector, use of public money can be examined,” he said.
Finance officials and central banks from a host of countries
have been putting their heads together in past months to find ways to tackle
the crisis, to prevent it from spiralling out of control and to stop such
conditions from recurring.
Strauss-Kahn said the credit crisis was far more than an
American problem.
“The crisis is global,” he said. “The
so-called decoupling theory is totally misleading.” Developing countries
such as
affected, the paper said.
He added that the IMF this week will revise down its global
economic forecasts to below the current private and official consensus.
“The forecasts we are going to release in a few days
are not very optimistic. The downside risks we underlined in the last world
economic outlook have materialised,” he said.
He said central banks around the world were constrained in
their ability to battle the growth risks by high commodity prices, the paper
said.
The IMF’s twice-yearly World Economic Outlook is due to be
released on April 9.
The fund said on Thursday it had cut its 2008 outlook for
world economic growth for the second time this year, in a move that
acknowledged housing and credit problems in the
toll on the global economy.
