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Central Banks Learned Lesson of 2008: Goldman's O'Neill

The world's central bankers have shown they've learned a lot from the 2008 financial crisis by taking coordinated actionWednesday to ease strains on the financial system, Jim O'Neill told CNBC Wednesday from London.

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Photo: Oliver Burston | Ikon Images | Getty Images

The decision to make it easier for banks to get dollars if they need them "is both a sign of how tricky things have become, but it’s also a clear sign that when they need to do things to stop a replay of 2008 they know exactly the kind of things they have to do," said the Goldman Sachs Asset Management chairman. "I’m pretty impressed."

Putting aside recent data showing a stronger-than-expected German economy, O'Neill says Europe "may already be in a recession," and said the current European financial crisis is the worst he has seen in 30 years.

"Whether that causes contagion elsewhere beyond Europe’s shores I think it still remains open to doubt," he added. "What is interesting is so many investors are convinced this is going to pull the world apart in general. I’m not sure that’s the case. But it’s certainly a severe crisis in Europe."

He said it will be important for European Union leaders attending a Dec. 9 meeting to "do something more decisively to encourage the market to at least try and support private-sector buying" of European bonds.

Italy, which has a bond auction coming up, is of particular concern.

"I don’t think the EMU [European Monetary Union] can survive without Italy in it, and I don’t think Italy can survive without bond yields above 7 percent," he said. "One of those things have got to give in the next few weeks."

He said Italian bonds yields above 7 percent "look quite tempting" and stressed that Italy, with its debt problems, isn't insolvent like Greece. "Europe can't afford to let Italy go the path of Greece if they want to keep EMU alive," he warned.

O'Neill came up with the phrase "BRICnations" 10 years ago today to describe Brazil, Russia, India and China. He said the decision of China's central bank cut its reserve requirement ratio for its commercial lenders for the first time in nearly three years, also Wednesday, is a "growing sign the cyclical condition of the Chinese economy is slowing."

"It is not a bad thing for China to face these constant reminders that they can’t rely on exporting either to the U.S. or Europe," O'Neill said. "We need to be exporting to them, and I think we’ll see more and more signs of that going forward."

As for the BRICs 10 years on, "the emergence of the BRICs as a political group has delivered nothing," he said.

The Associated Press and Reuters contributed to this report.