IMF head cautiously hopeful about end of global crisis

Addressing an audience of students and journalists at a conference held by Istanbul's Bilgi University, International Monetary Fund Managing Director Dominique Strauss-Kahn said that last month's G-20 meeting in Pittsburg where global leaders committed to working together to further stimulate the world economy gave him hope that his fears of consensus evaporating now that the worst of the crisis is over were unfounded. He said the G-20's vote to give the IMF a greater role in the global financial system's oversight also signaled the crisis may be near its final end. However, he warned that two principal risks threaten the recovery that appears to be underway: governments rolling back on their stimulus plans too early, and the corporate sector's non-performing loans on banks' balance sheets. On the IMF's handling of the crisis, he said the results were mixed although mostly positive. "We did quite poorly with respect to surveillance," he said, adding that the IMF, as well as governments around the world, failed to identify the factors that were ultimately to lead to the crisis. Rather than following the austerity measures that the Fund is known for, the IMF embarked on dramatic financial stimulus programs. "The IMF is known for tightening, not loosening," Kahn said, adding that because the IMF "knew that there was no way to avoid another Great Depression without financial stimulus," it called for stimulus in order to stimulate public demand. "To replace private demand with public was essential," he said. On accusations that the Fund often exacerbates social, political and economic hardships through harsh austerity measures, he said, "Such accusations are both fair and unfair," but conceded it too often acted too rigidly in implementing such measures. Stating that a new era was about to start, during which global economy would be governed at a global level and local solutions would not be offered for global problems, Kahn said, "In line with this major shift in the world economy, the IMF has begun to change its policies to be more flexible." Kahn later took questions on Turkish-IMF relations. "If the Turkish government believes it would be useful, an (standby) agreement could be signed," he said. "We will continue to hold talks with Turkey and we will see what is needed. We are in no hurry." In related news, Prime Minister Recep Tayyip Erdogan reiterated on Wednesday that Ankara would not sign an agreement with the IMF without reaching a satisfactory compromise that would benefit Turkey. Talks with the IMF will continue and every term of a possible deal will be discussed, he said, but added that unless a satisfactory deal is reached, Turkey will continue independently of IMF recommendations.