Time to clean up bad banks: IMF
April 20, 2009 - Business Report - Berlin
Governments the world over are acting too slowly when it comes to cleaning up their banks' balance sheets, IMF chief Dominique Strauss-Kahn was quoted as saying on Sunday.
"In Germany, other European countries or in the United States, everywhere, we are being too slow to deal with this topic," Strauss-Kahn said in an interview with business daily Handelsblatt's Monday edition.
It was more important to find a way of helping banks rid themselves of their toxic assets, he said, than pumping money into the economy through economic stimulus packages.
German Chancellor Angela Merkel will hold a crunch meeting on Tuesday to thrash out a plan to remove toxic assets from banks, an issue that has become a political hot potato in Europe's largest economy with an election looming.
Strauss-Kahn said he saw no pick-up in the global economy until the second half of 2010 and played down the risk of inflation in the wake of massive stimulus packages being implemented by almost all major economies.
"In the short-term, the inflation risk is about zero. Today, we have more of a deflation problem," the former French finance minister said, adding that deflation can also have a sizeable impact on growth.
The financial crisis has also led to a substantial revision of ideas regarding the market economy, Strauss-Kahn said.
"I would not say that we are seeing the end of the market economy. But we are certainly seeing the end of the idea that the market can regulate itself," he said.
"A market economy needs rules. And this simple idea was forgotten, at least in the past decade."
Governments the world over are acting too slowly when it comes to cleaning up their banks' balance sheets, IMF chief Dominique Strauss-Kahn was quoted as saying on Sunday.
"In Germany, other European countries or in the United States, everywhere, we are being too slow to deal with this topic," Strauss-Kahn said in an interview with business daily Handelsblatt's Monday edition.
It was more important to find a way of helping banks rid themselves of their toxic assets, he said, than pumping money into the economy through economic stimulus packages.
German Chancellor Angela Merkel will hold a crunch meeting on Tuesday to thrash out a plan to remove toxic assets from banks, an issue that has become a political hot potato in Europe's largest economy with an election looming.
Strauss-Kahn said he saw no pick-up in the global economy until the second half of 2010 and played down the risk of inflation in the wake of massive stimulus packages being implemented by almost all major economies.
"In the short-term, the inflation risk is about zero. Today, we have more of a deflation problem," the former French finance minister said, adding that deflation can also have a sizeable impact on growth.
The financial crisis has also led to a substantial revision of ideas regarding the market economy, Strauss-Kahn said.
"I would not say that we are seeing the end of the market economy. But we are certainly seeing the end of the idea that the market can regulate itself," he said.
"A market economy needs rules. And this simple idea was forgotten, at least in the past decade."