Nights in jail for Dominique Strauss-Kahn. The former chief of the International Monetary Fund Susie will be released tomorrow on $1 million bail. A Federal judge granted bail late today, pending Strauss-Kahn`s trial on charges he sexually assaulted a hotel maid in New York City.
NIGHTLY BUSINESS REPORT ANCHOR: Tom, those charges forced Strauss-Kahn to resign as the IMF`s chief and also set into motion a high-profile search for his replacement. It`s a coveted job. The IMF acts like the top central banker for the global financial system.
It`s also a job that`s a pressure cooker, given the state of the world`s finances. Acting chief John Lipsky today called the global economy shaky. Speaking to world bankers, Lipsky said the global recovery is quote, fragile and beset by uncertainties.
No matter who is in charge of the IMP, I think it`s going to take a couple years, maybe longer to sort out. Unfortunately the European sovereign debt crisis does remind me an awful lot of the play that occurred in Latin America, took the 1980s and 1990s to settle a lot of the debt problems there. Ultimately the lack of government solutions ended up in the market pushing for market solutions. I think what you`re going to see in Greece in particular is a very good chance of a debt restructuring, which has pain sharing by private investors are going to have to take a haircut at some point with their debt. So there`s a long period of structural adjustment here. But there`s a big push in nervousness in markets to resolve the debt issue.
The other side of this whole debt crisis, the countries in Europe that are doing better, that are growing. Let`s take a look at the list there, the stronger European countries, Sweden`s economy at the top, expected to grow 4.3 percent this year. The rest of the Eurozone nations growing anywhere between 2 percent, 3 percent in their economies. How are these weak countries impacting the growth prospects for the healthier ones?
Issue is the stronger economies have done well because of export generation. The issue that they face is that if the weak countries, the peripheral economies, if they continue to have problems, if they really take a slump further in terms of economic growth and they default on their debt, it`s going to impact the wealthier, the more dynamic northern economies, right through the financial system. The banks, the insurance companies, pension funds, all of these institutions hold debt from southern European countries. So there`s a real point of concern here, as you go forward, that as the debt play out occurs here and the risk of a restructuring increases, you have to wonder about the impact on European financial institutions.
No comments:
Post a Comment