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IMF report warns of false security

Wednesday, October 10, 2012 - 01:43

Oct.10 - IMF director says crisis cheaper if solved now while questioning market thinking on the U.S. and warning emerging economies against complacency

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The IMF's Jose Vinals says crisis cheaper if solved now while questioning market thinking on the U.S. and warning emerging economies against complacency International Monetary Fund director Jose Vinals says the longer it takes to resolve the current financial crisis the more expensive it will become. Vinals, director of the IMF's monetary and capital markets department and the main author of the financial stability report Europe's troubles should serve as a lesson to the heavily indebted United States and Japan that delaying the necessary policy adjustments until markets force their hands would lead to harsher economic outcomes. (SOUNDBITE) (English) IMF FINANCIAL COUNSELLOR AND DIRECTOR OF MONETARY AND CAPITAL MARKETS DEPARTMENT, JOSE VINALS SAYING: "The more time that goes by without a complete solution, the more are the eventual costs for everybody of resolving the crisis." "The safe haven is one reason, but markets may be supremely confident on the ability of the political system in the U.S. to deliver an agreement. But is it supreme confidence or is it complacency? And is there room for disappointment? So lets not disappoint markets. Lets have a political compromise, to avoid these very tough and sudden fiscal contractions happening in the U.S. economy that will bring it into recession and which will send shockwaves, negative shockwaves, to the rest of the world economy." "We are also encouraged by the steps being taken in the context of reducing the budget deficit in a context of very low growth, this is a very challenging task. I think that Spain is doing important things, and whether this should be supported also by the ECB's OMT mechanism is up to the Spanish authorities." "Vigilance is necessary and measures are necessary in order to deal with these financial vulnerabilities so that they do not lead into problems later on. So there is not room for complacency either in emerging markets."

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IMF report warns of false security

Wednesday, October 10, 2012 - 01:43