The International Monetary Fund says an improving global economy is prompting a recovery in world financial markets and reducing the risk of financial crisis. The IMF has begun to issue regular assessments of global financial stability.
Gerd Hausler, the German banker who heads the IMF's new capital market division, said the world economy is recovering from the shock of September 11 and economic downturn. "The recovery we see on a weekly basis almost stronger and stronger is good news for us. We all like to see it and hear it. But not, by the way, not just for the outlook of mature markets but also for emerging markets the outlook has improved," he said.
The IMF is more closely monitoring financial markets in order to try to avert a repeat of the Asian financial crisis of 1997/1998 where contagion spread from one market to another. Mr. Hausler is gratified that Argentina's default on its foreign debt in December did not have a similar contagion effect. "We know from experience that when there is a country having serious financial difficulty, to say the least, when this comes very suddenovernight almostfinancial market participants become rather more nervous as opposed to the case of Argentina where the problems were mounting in a fairly slow way," he said. "So this was a problem and a default that many people could see coming."
Among other potential problems, Mr. Hausler identified high levels of debt in America and Europe and weakness in Japan's banking system.