adminHe told reporters that European banks are more willing to reduce lending than raise new capital to meet higher capital adequacy ratio standards — a development that has negative implications for the regional economy.
A fundamental solution to the debt crisis should be based on economic development and growth, and there should not be excessive focus on austerity measures, he said, adding that the IMF’s strategy for Greece has not been well adopted, which he called “a pity”.
Mr Strauss-Kahn predicted it will take a long time for the European Union to emerge from the crisis.
France and Germany need to compromise and come to an agreement on a plan to move forward, he said, adding that the relationship between the two countries’ leaders is not as strong as in the past.
Mr Strauss-Kahn also said the global monetary system is not working properly and needs to be improved, and that a functioning system depends on orderly cross-border capital flows.
He said the IMF should also consider adding more currencies to the basket that forms Special Drawing Rights (SDR), a kind of synthetic currency created by the IMF. The current SDR basket includes the US dollar, euro, Japanese yen and British pound.
The yuan is a “natural candidate” for inclusion in the SDR basket, but it must first float freely, he said.
He also said emerging economies, such as Brazil, India and China, should have higher quotas for financial contributions to the IMF and more voice on the IMF board, the fund’s main decision-making body. — news.com.au
Online Reporter