Dominique Strauss-Kahn
„We are too slow in cleaning up the bank’s balance sheets“

Interview with the Managing Director of the International Monetary Fund (IMF), Dominique Strauss-Kahn

Handelsblatt: Mr. Strauss-Kahn, in recent weeks there have been some tentative signs of an economic recovery. US President Barack Obama already sees "glimmers of hope." Is the worst now behind us?

Dominique Strauss-Kahn: I wouldn't put it that way. On one hand, we have the massive downturn that we were looking at until recently, the impacts from which are still multiplying, as is the case with exports. At the same time there are a few positive signals. So there are two opposing movements and we find ourselves at a crossroads. But we are not yet over the hump. The IMF expects a recovery to take hold in the first half of 2010.

How severely is the world economy going to shrink?

The outlook we are putting forward this week will be worse than the one we had made previously. Until now we were assuming that the world growth rate would be negative by a half to one percentage point. But now it is becoming more negative.

Are we doing enough about this? Prior to the G- 20 summit Germany was already being heavily criticized here in the United States for doing too little to crank up its economy. Yet that criticism overlooked some factors such as government transfers in the German Social Security system. Who's right?

That was simply a false debate. One can of course argue that some countries could have done more. Overall, what has happened is what we have recommended, namely the obligation to take economic stimulus measures of 2 percent of GDP at a global level. Every country has done its part, then. On the other hand, there was also some criticism that the United States was showing too little interest in financial market regulation. In the end, though, there was agreement with respect both to stimulus and to regulation.

So Germany has done enough?

Well, things don't look bad for 2009. We'll have to see what's still needed later. We have to await the results in order to know what we need for next year.

Yet the economic cycle and regulation are only one side of the coin?

That's right. For several months it has been clear that more had to be done about the banks' balance sheets. Whether in Germany, or in other European countries, or in the United States, everywhere we were too slow in addressing this issue. It's fine to come up with stimulus packages, to impose regulations, or to close down tax havens in the Caribbean, but the real problem is to clean up the banks' balance sheets.

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