No country safe from euro crisis, says IMF

The Malaysian Insider/Reuters
Dec 16, 2011

WASHINGTON, Dec 16 — No country is immune from an “escalating” euro zone crisis and each one must act to head off the risk of a global depression, the head of the International Monetary Fund said yesterday.

IMF Managing Director Christine Lagarde, speaking at the U.S. State Department, said the outlook for the world economy is “quite gloomy” and warned that failure to act collectively could lead to protectionism and isolation reminiscent of the 1930s depression.

“There is no economy in the world, whether low-income countries, emerging markets, middle-income countries or super-advanced economies that will be immune to the crisis that we see not only unfolding but escalating,” Lagarde cautioned.

“It is not a crisis that will be resolved by one group of countries taking action. It is going to be hopefully resolved by all countries, all regions, all categories of countries actually taking action.”

The IMF has warned that it is likely to cut its 2012 growth projections, with the economy struggling with a worsening two-year euro zone debt crisis and sluggish US growth. There are also signs from falling Chinese factory output that manufacturers are struggling with waning global demand and tighter credit conditions.

European leaders last week agreed to lend up to €200 billion (RM840 billion) to the IMF to help struggling euro zone states and are hoping non-European countries will also step in with loans provided through the global lender to help.

The IMF is currently in talks with member countries on providing additional resources to the Fund.

Lagarde said global economic leaders now needed to take a holistic approach toward addressing systemic weaknesses, such as those underscored by the current euro zone debt crisis.

“It is going to require efforts, it is going to require adjustment, and clearly it is going to have to start from the core of the crisis at the moment, which is obviously the European countries and in particular the countries of the euro zone,” Lagarde said.

She cautioned, however, that democratic government processes often made quick fixes difficult, saying the collision of market expectations with political reality must be resolved.

“It is really that Gordian Knot that needs to be cracked, that needs to be addressed as collectively as possible, starting with those at the center but with the support of the international community probably channelled through the IMF,” she said.

Lagarde noted some relative bright spots in the economies of Asia and Latin America, which she said had taken steps, with IMF help, during crises in the 1980s and 1990s to address weaknesses in their banking systems and financial regulatory frameworks.

“All those challenges that they faced in the days of the Asian crisis, of the Latin American crisis have now served them well,” Lagarde said. — Reuters

  1. #1 by monsterball on Friday, 16 December 2011 - 10:58 am

    That’s commonsense explanations.
    But countries with natural wealth that have accumulated billions in savings can use the billions to help the citizens….such as subsidizing all natural commodities…spending the said billions…to make sure their said citizens need not suffer so much.
    Malaysians having savings will surely see their children have the same food and facilities,
    However…UMNO b is famous to make sure all the billions are stolen away by them… way or another,
    Lets see…if Malaysians suffer from all sorts of increase prices making life miserable…then Najib will surely loose more votes.
    All Malaysians know UMNO b is a very corrupt and greedy party..
    There are some still supporting UMNO b feeling the pinch is not painful yet and they are so poor..feeling billions stolen does not affect them at all.
    Wait till…sugar…..electricity….cooking…rice… all and all the essentials prices rise sky high.
    Then they know and it is always too late.

  2. #2 by dagen on Friday, 16 December 2011 - 2:29 pm

    Nonsense. No country is immune from the eurozone crisis EXCEPT umnoland. Here umno’s ketuanan rights would be more than sufficient to ward off any undesirable economic effects flowing from the eurozone. To say otherwise would amount to anti-agung, anti-sultan, anti-islam jenis umno, anti-gobermen, anti-melayu (acutally umnoputras), unpatriotic, ungrateful and for spewing such nonsense that person is ISA-able and if he is malaysian, could have his citizenship revoked.

    As proof that we are OK look at the 250m given to the mamak woman. Nothing happens. The country did not go bankrupt because of that. As further proofs, look at latest auditor general’s report. Look at the billions missing. If umnoland is not ok, then surely we all would be begging for money somewhere. Look at the billions more umno planned to spend on military equipment. This shows that despite all the wastage we still have lots of money. This is umnoland. The land where milk and honey flow forever and in abundance.

    Jib has tower.
    Ros has hermes.

  3. #3 by dagen on Friday, 16 December 2011 - 3:41 pm

    But really in the worst case scenario we could see a repeat of the 1932 great depression. Two things we ordinary folks ought to be prepared for:

    (1) crazy inflation – where prices of ordinary goods (if you could find them on the shelves of grocery stores) would shoot up by several hundred percent; and

    (2) even if you have some money left (after having been ravaged by inflation and maybe even devaluation) you may not be able to find basic food stuff to buy.

    I am not being pessimistic. But I am certainly no so optimistic. Save some money in gold. At least the value of gold could hold, hopefully.

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