For IMF, Debt Crisis Fears Spread Beyond US and Europe
WASHINGTON—Lost in much of the rancor and hand-wringing over the debt crisis in the European Union and the US is that it's not just those two regions that will be affected.
Instead, another financial pandemic, similar to or worse than the 2008 calamity, would infect multiple parts of the world, and particularly those emerging economies that are being counted on as the main drivers in the global growth engine.
That contagion problem, as much as anything, is what keeps global policy makers awake at night.
World Bank President Robert B. Zoellick warned of "the looming danger that failure to take decisive action in Europe and the United States may shake the entire global economy, throwing developing countries off track...The numbers emerging out of developing countries over the past month, even the past week, are shaking and shaky."
Preventing the disease from spreading, then, will be a large focus of the various organizations — the World Bank, International Monetary Fund and G-20 — which will be hashing out the problem ahead of the early November G-20 conference in Cannes.
"We shouldn't be under any illusions. We are in this together," IMF Managing Director Christine Lagarde said. "Resolving the crisis in the advanced economies is a major priority because it affects everybody — not just the advanced economies but the rest of the economies."
Stemming the flow of the crisis — which centers for now on Greece's sovereign debt obligations, but could cascade quickly in case of a default — is paramount among IMF priorities.
Global leaders were taking great pains at the World Bank/IMF conference this weekend to dispel speculation and rumors about Greece defaulting and leaving the EU, and instead focused on what steps were being taken to resolve the problems.
"Greece is and will always be a euro area member state," Greece Finance Minister Evangelos Venizelos said in a statement. "At a moment that Greeks are subjected to new and very important new sacrifices, we regain of our lost credibility, we answer back to the negative stereotypes about Greece that have been floating around internationally over an extended period of time. "
Lagarde, too, fired back, saying the various negotiations and discussions yielded not only a framework going forward but also broad agreement that the organizations take action to stop the crisis from spreading.
"We are halfway through and it's a question of pushing hard to get to the other side," she said in one of her more optimistic statements, which countered her rather grim opening remarks Friday.
Whereas on Friday she spoke of how "the mood outside is grim," the following day she referred to "a shared sense of common purpose" from officials gathered for the steering committee meeting.
"There was no denial, there was no fingerpointing. It was about recognition and it was about support," Lagarde said. "Today we agree to act decisively to attack the danger confronting the global economy. There was dialogue and there was a clear response from the membership."
Earlier, billionaire investor and liberal activist George Soros predicted the euro zone crisis would be worse than the 2008 financial crisisheralded by the collapse of Wall Street banking titan Lehman Brothers.
Soros said the crisis was especially pernicious because of the impact it would have on emerging economies that provide an increasing level of financing for the developed world.
IMF Chairman Tharman Shanmugaratnam said the organization is acutely aware of the global risks and is prepared.
"The IMF is ready and it will deliver on any type of resources necessary and available to all its members," he said. "It's not just a euro-focused issue at the moment. There are other countries affected. It's a global occurrence."