U. S. Treasury Secretary Timothy Geithner said Saturday that the euro area sovereign debt and banking crises are the biggest threats to the global economy and that European officials need to address and remedy that quickly. Meanwhile, leaders of the International Monetary Fund say plans are underway to help stave off further financial crisis in Europe.
In years past, when world financial leaders have convened at the World Bank and International Monetary Fund, protesters have descended upon them, criticizing capitalism and denouncing greed.
But the streets were quiet at this year's conference... some security, but mostly polite attendees walking to and from meetings.
There were smiles, as cameras flashed in photo ops, but beneath the surface ... a grimness.
“We are in a precarious situation. We face a confluence of sovereign debt and banking risks with the epicenter of that being in the euro area,” warned Tharman Shanmugaratnam, chair of the International Monetary and Financial Comittee.
Europe’s problems, he said, are underpinned by a weakened global economy, especially in the U.S., compounded by a lack of confidence in fiscal policy actions in developed countries.
Earlier Saturday, U.S. Treasury Secretary Timothy Geithner, in his strongest language yet, said European leaders should work more closely with their central bank to ensure capital and liquidity remain available in what could be rough days ahead.
IMF Managing Director Christine Lagarde says that topic is on the table.
“However grave and serious the moment is we, and also and the global economy, is half way through the work that needs to be done," she said. "If you look at financial regulation, if you look at crisis management, if you look at improved governance in the euro zone, if you look at strengthening the capital of the banks, a lot has already happened.”
Meanwhile, the finance chiefs of Brazil, Russia, India and China, the so-called BRICS countries, say they will do what they can to help stabilize the world economy. Emerging markets in general have weathered the financial crisis better than developed economies.
“Formerly with a cold in the advanced economies we would catch pneumonia," noted Nicolas Eyzaguirre, IMF Western Hemisphere Department Director. "Looks like this time around the pneumonia is in the advanced countries and we will probably catch a cold.”
These countries still have to consider where to invest their resources.