Paris: Governments must coordinate better to fight the global economic crisis as national remedies are proving ineffective, International Monetary Fund chief Dominique Strauss-Kahn said on Tuesday.
If countries took the necessary steps to deal with the situation, the crisis could come to an end in early 2010, he told France Inter radio.
“What shocks me, you see, what bothers me a bit is that in the international arena ... everyone agrees that we need to work and act together,” he said.
“Then when everyone goes home, everyone has his national constraints, everyone does things a bit differently and sometimes with a little contradiction, and it is for this reason that there are some risks,” he said.
Governments around the world have spent immense amounts on stimulating their economies and on bailouts, especially for the banking industry.
Strauss-Kahn, who attended a G7 gathering in Rome at the weekend, will meet British Prime Minister Gordon Brown this week to prepare for an April summit on the global economic crisis. The talks will be part of intense diplomacy in preparation for the G20 meeting of advanced and emerging economies which Brown will host on 2 April in London.
Many countries were guilty of showing protectionist tendencies as they channelled public funds towards their fragile banks. Governments tended to tell lenders to keep the cash within national borders rather than to help other countries with their exports, he said.
“This is another form of protectionism. This manner of seeking national solutions is human ... It is quite a natural reaction but it is not efficient,” said Strauss-Kahn. “It is really necessary, because this is the first real global crisis ... that the responses are much more coordinated.”
There was some coordination in Europe, but “we don’t have enough,” he added.
Strauss-Kahn also said that the pace at which banks were cleaning up their balance sheets was not as rapid as it should be and that government stimulus plans need to be more powerful.
“It is necessary to get to the bottom of the clean-up of banks’ balance sheets. This is not happening quickly enough.”
Strauss-Kahn saw a glimmer of hope for next year. “2009 will in any case be difficult,” he said, adding that many people would lose their jobs. “If we do everything we need to, the end of the crisis could come at the start of 2010. If we do not do what is necessary, it will last,” he added.
A Reuters poll of economists in the US and Europe taken last week on how long the credit crunch would last was roughly in line with Strauss-Kahn’s views, with 34 of 72 saying it would last another 6-12 months and 31 saying more than a year.