U.S. must act, Europe stand ready: IMF chief
The United States needs to act urgently to shield its economy from an escalating credit crisis and Europe must ready plans in case its problems worsen, the head of the International Monetary Fund said on Tuesday.
“We’re right at the moment where action is needed,” IMF Managing Director Dominique Strauss-Kahn told Reuters.
“A non-perfect plan is better than no plan at all,” he said of the $700 billion bank bailout plan rejected by the U.S. House of Representatives on Monday.
Strauss-Kahn said restoring market confidence required the bailout plan to be passed quickly and for the U.S. public to understand what is at stake unless the economy starts to function properly again.
As the crisis has spread beyond Wall Street, European countries have stepped up their efforts to avoid bank defaults as concerns grew that more institutions would fail, prompting the Irish government to guarantee all bank deposits.
The lack of a pan-European regulator makes it more difficult to respond to the crisis in the event of the collapse of a big bank whose business crosses borders, Strauss-Kahn said.
“Developing a contingency plan does not mean it’s announcing a lot of trouble coming. But they’re not totally immune (from the U.S. financial crisis), and so they need to organize. At the European level this is totally needed.
“The EU rules make it much more difficult than in the U.S.,” to act across borders, he said.