News / Economy

IMF Warns of Growing Economic Discord

International Monetary Fund (IMF) Managing Director Dominique Strauss-Kahn arrives for the opening news conference of the annual IMF and World Bank meetings, Thursday, Oct. 7, 2010, in Washington
International Monetary Fund (IMF) Managing Director Dominique Strauss-Kahn arrives for the opening news conference of the annual IMF and World Bank meetings, Thursday, Oct. 7, 2010, in Washington
Diaa Bekheet

The head of the International Monetary Fund warns global cooperation inspired by the financial crisis is beginning to fray.

IMF Managing Director Dominique Strauss-Kahn told reporters in Washington Thursday too many countries are pursuing policies that will boost their immediate economic fortunes but harm the global economy in the long-term.  He said there can be "no domestic solution to a global crisis."

Some countries and economists have raised concerns about what they describe as a "global currency war" - accusing some nations of lowering the value of their currencies to give their products a price advantage on the world market.  Strauss-Kahn downplayed the use of that term, but agreed some countries have been using their currencies like weapons.

The IMF chief also sent a message to emerging economies that have been clamoring for a greater voice in IMF decisions.  Strauss-Kahn said countries that want to have a greater say also need to accept more responsibility for maintaining a healthy global economy.

Countries including China, Japan, South Korea, Taiwan, Thailand and Colombia have been criticized for lowering the value of their currencies.  And on Wednesday, U.S. Treasury Secretary Timothy Geithner said global growth will slow and that "all of us will be worse off" unless emerging economies change their tactics.

Despite the concerns, the IMF chief expressed hope that the organization could help make progress during its three-day annual meeting, which starts Friday in Washington.  But like the U.S. treasury secretary, he said any solutions will take time to implement.

Strauss-Kahn also reiterated that the recovery from the global economic crisis remains fragile.

He said the crisis has ended in Asia and South America, where individual economies have seen strong growth, and that sub-Saharan Africa is also growing.  But warned there is still concern about Europe and the United States.  

He said the global crisis will not be over until unemployment rates decrease significantly.

On Wednesday, the IMF forecast the global economy will grow 4.8 percent this year and slow down a bit next year.

IMF experts say emerging nations will grow more than 7 percent this year.  Wealthy advanced nations are lagging behind, and will expand just 2.7 percent.

The IMF's chief economist, Olivier Blanchard, also told journalists in Washington that the world economy is not likely to lapse back into recession.

But he said the financial system still needs reforms, and he urged wealthy nations to cut government deficits, increase private demand, and boost exports.

Some information for this report was provided by Reuters.

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