IMF rules out double dip, fears downward threats

International Monetary Fund (IMF) Managing Director Dominique Strauss-Kahn today ruled out any possibility of an impending double-dip recession even as he warned against downward risks posing the countries while they were recuperating, albeit languidly.

“We need to sustain the global recovery. We don’t believe at the IMF that the double dip is the most probable forecast but it is a possible tail risk,” Strauss-Kahn said here, adding that the global recovery was “fragile and uneven”.

“Growth in Brazil, Chile and Peru is good. In parts of the world, in Asia, South America and parts of Africa, growth is going well.”

The IMF chief also underscored the need to learn “some hard lessons” from the economic crisis. Stressing the fact that while IMF is not a commercial bank, he said the institution was always eager to provide financial and technical support when needed.

“IMF is responding to its membership. We never ask ourselves to be a member to put in place a programme. We are answering to the request by the members. When some members want some support — technical support, financial support — we are of course happy to do it. We are not a commercial bank. We are not knocking at doors saying we should provide you some loans,” he said while addressing the business leaders in New Delhi and the media.

On the recent state of Ireland, which was the second country in Europe to seek for a bailout package after Greece, Strauss-Kahn said it was the banking sector which was responsible for the Irish economy cave-in. However, he said it would recover rapidly.

Recently, the EU governments approved a Euro 85-billion bailout package for Ireland to strengthen its banking sector and help finance its debt.

The IMF head, who would be travelling to Brussels tomorrow, said that while the recovery in Europe remained helplessly sluggish, on the other hand, there remained a high risk of debt facing some of the European countries. So, he said, the entire European nations had to deal with fiscal consolidation and need to reinstate confidence in their public finances.

He also underscored the need for the US economy to grow fast and in a robust manner, else the consequences would be dramatic. “If growth stalls in the US, the consequences for the rest of the world will be huge.”

Strauss-Kahn also candidly handled questions related to the Chinese currency manipulation. “During the crisis, the way the Chinese authorities decided to put in place the stimulus was to revise the shift from an international-led model to a domestic-led model.”

Strauss-Kahn, who is also grabbing international headlines currently for being a potential candidate for French presidency, today hinted towards a change in the leadership of IMF and emphasised that more and more developing countries would be considered to head the institution.

“There was a so-called agreement between the Europeans and the Americans since the beginning that the head of the World Bank would be an American citizen and the IMF head would be an European and rightly the emerging markets had said years ago that developed countries cannot keep leading on one hand and acknowledge that the world is changing on the other. There is a need to have a successor through a more open selection. But this does not mean that in future it would be forbidden by the Europeans to head the IMF but more representation would be from the rest of the world,” he told reporters later in the day.