The head of the International Monetary Fund (IMF), Dominique Strauss-Kahn, said on Thursday that the debt crisis in Europe should not be underestimated, but tipped Ireland to recover.
On Sunday, the European Union and the IMF announced an €85-billion bailout for Ireland to shore up its banking sector and meet its debt obligations.
The move has intensified speculation that Ireland’s fellow eurozone debt-ridden financial stragglers, Portugal and Spain, could also need a bailout in due course.
“We should not underestimate the importance of this crisis which, in Ireland, is mostly coming from the banking sector,” he told reporters after meeting Indian Finance Minister Pranab Mukherjee in New Delhi.
“But I think the decision that has been made will fix the problems in the banking sector, and the Irish economy will come back on track rather rapidly,” he added.
Sweeping changes
Speaking in India, which has the world’s second-fastest growing economy after China, he also proposed a radical break from the past in the way the heads of the IMF and its sister organisation, the World Bank, are selected.
Under an informal arrangement dating back to the formation of the global financial bodies after World War II, Europeans and Americans have always headed both institutions.
Strauss-Kahn is from France and his counterpart at the World Bank, Robert Zoellick, is American.
The Frenchman proposed that the next heads should be from neither Europe nor America, Dow Jones Newswire quoted him as saying.
At the beginning of the month, the IMF executive board agreed to sweeping changes that will give China and other emerging-market economies a greater say in the financial institution.
Strauss-Kahn has been a vocal advocate of giving more weight to emerging nations through their financial contributions to the IMF — effectively making them shareholders — and their positions on the executive board. — AFP