Government intervention at a worldwide level is needed to address the credit crisis, the head of the International Monetary Fund said on Monday.
“I really think that the need for public intervention is becoming more evident,” IMF Managing Director Dominique Strauss-Kahn told the Financial Times in an interview.
Strauss-Kahn’s comments come just days before world finance ministers and central bank governors gather in Washington for the meetings of the IMF and the World Bank, where steps to address the crunch in financial markets will be discussed.
Strauss-Kahn told the paper that government intervention — in the securities market, the housing market or the banking sector — would act as a “third line of defence” to support monetary and fiscal policy.
“Effort has to be made on loan restructuring. With respect to the banks, if capital buffers cannot be repaired quickly enough by the private sector, use of public money can be examined,” he said.
Finance officials and central banks from a host of countries have been putting their heads together in past months to find ways to tackle the crisis, to prevent it from spiralling out of control and to stop such conditions from recurring.
Strauss-Kahn said the credit crisis was far more than an American problem.
“The crisis is global,” he said. “The so-called decoupling theory is totally misleading.” Developing countries such as China and India would be affected, the paper said.