Dominique Strauss-Kahn says 2010 should be a “year of transformation”, but urges caution.
Governments must tread carefully on their exit routes from economic stimulus initiatives in the face of the global downturn, the managing director of the International Monetary Fund has warned.
Speaking at an IMF press briefing on Thursday January 14, Dominique Strauss-Kahn said the economic outlook is “stronger but fragile” – stronger because the recovery is taking place faster than expected, but fragile because in much of the world it is still supported by public spending, while private demand remains weak.
The question now is when governments should start exiting their stimulus packages. Doing so too late will be costly, Strauss-Kahn said, but governments must not assume the end of the crisis is nearer than it is and exit too early.
Strauss-Kahn’s advice is for governments now to redirect their stimulus initiatives towards tackling unemployment, where he said “the worst is possibly yet to come”.
Meanwhile, he said that 2010 must be “a year of transformation” in response to the crisis. In the financial sector, he said, regulation and supervision still need to be “stronger and smarter”. But he added there was a danger that the political momentum necessary to achieve this could wane as the crisis eases, and that banks themselves are already “going back to business as usual”.
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