Global intervention needed, says IMF head

Source: Exec Digital UK

Date :4/7/2008 4:07:32 AM

Government intervention at a global level is required to tackle the credit crisis, according to the head of the International Monetary Fund.

The need for public intervention was "becoming more evident", Dominique Strauss-Khan (pictured) told the Financial Times, warning that market turmoil will take a serious toll on world growth.

Mr Strauss-Kahn, a former French finance minister, rubbished the notion that the credit crisis was largely a US problem. “The crisis is global,” he told the newspaper.

Global crisis

Until now authorities, have employed increasingly aggressive measures to support market liquidity but stopped short of intervention in the financial system – with the exception of the rescue of Wall Street investment bank Bear Stearns last month and Northern Rock.

The securities market and housing sector could get more support, Mr Strauss-Kahn said ahead of a gathering of world financial leaders at the IMF's spring meeting in Washington DC.

This, along with more intervention in the banking sector, would offer a "third line of defence".

Intervention

In recent months finance ministries and central banks have been exchanging ideas behind the scenes on possible interventions as part of contingency planning.

Mr Strauss-Kahn’s call will increase pressure on them to act.

The Institute of International Finance, an association representing big banks, last week said there was a “growing case” for government intervention.

Co-ordinated work

Justin Urquhart Stewart of Seven Investment Management said the move proposed by the IMF would need more co-ordinated and effective work between governments.

"Rather than just waiting for individual banks to go wrong the weaker banks will need further help, and it's going to be more than just access to liquidity," he told the BBC.

April 07, 2008