Wednesday September 23, 03:29 PM
Global economic growth engine 'starting up': IMF chief
NEW YORK (AFP) - International Monetary Fund chief Dominique Strauss-Kahn on Wednesday said the global economy appears to be recovering from recession but the crisis was not yet over.
"Financial conditions have improved and the growth engine seems to be starting up again," Strauss-Kahn said in a speech at an international leadership meeting in New York, according to prepared remarks.
"Not so long ago, the global economy stood at the edge of the abyss," he said, but he warned "the crisis is by no means over."
The IMF managing director noted the 186-nation institution has devoted much of its resources to fighting the global financial crisis and the worst economic slump since the Great Depression.
Recalling the "outright panic" that followed the collapse of Wall Street investment bank Lehman Brothers (NYSE: LEH - news) in September 2008, Strauss-Kahn said that at the time "economic activity began a downward spiral."
Fears of another Great Depression "were not unfounded," he told the Global Creative Leadership Summit, a meeting of heads of state, business and international institution leaders and Nobel laureates.
"But today's world looks different. The crisis is not over, but I hope the worst is now behind us. We seem to have averted disaster."
The IMF chief underscored that the fund was projecting a global recovery in the "first part" of 2010.
"And as this crisis unfolded, I think we proved our worth with our realistic forecasts, both for growth and for credit losses," he said.
The IMF is scheduled to publish updated world economic forecasts on October 1.
"As we look at the current global financial crisis, the worst since the Great Depression, the risks were incredibly high," he said. "The global economy could have faced a meltdown. But we pulled back from the brink, and the IMF certainly played its role."
On the eve of the Group of 20 (G20) summit in the United States, Strauss-Kahn also underlined the role of the IMF "as a policy advisor, emphasizing in particular the need for common, coordinated, action."
"The IMF was among the first to pinpoint the policy responses that have now become part of conventional wisdom, especially the fiscal stimulus and the need to restructure the banking system," he said.
Strauss-Kahn highlighted his institution's promotion of economic stability and world peace.
"The stakes are particularly high in the low-income countries, where populations are especially vulnerable," he said.
He noted that the IMF was created in the aftermath of World War II to fight the economic roots of war.
"In many areas of the world, what is at stake is not only higher unemployment or lower purchasing power, but life and death itself," the former French Socialist finance minister said.
"Economic marginalization and destitution could lead to social unrest, political instability, or a breakdown of democracy. We could see war. This is what we must avoid," he insisted, calling for "sustained help" to countries in need.
"When the nations of the world come together to address common challenges in a spirit of solidarity, we can attain a virtuous cycle of peace and prosperity, and avoid a vicious cycle of conflict and stagnation. On first glance, this might seem incidental to the role of the IMF. But it is not. It underpins our mandate."
Strauss-Kahn's speech came on the sidelines of the United Nations General Assembly and ahead of the two-day meeting of leaders of the G20 developed and developing countries that opens Thursday in Pittsburgh, Pennsylvania.
Hosted by US President Barack Obama, the G20 leaders are expected to discuss their unprecedented efforts to stem the economic efforts, reform of the financial system and climate change.
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