JAPAN: The IMF's Jose Vinals says crisis cheaper if solved now while questioning market thinking on the U.S. and warning emerging economies against complacency
Record ID:
466667
JAPAN: The IMF's Jose Vinals says crisis cheaper if solved now while questioning market thinking on the U.S. and warning emerging economies against complacency
- Title: JAPAN: The IMF's Jose Vinals says crisis cheaper if solved now while questioning market thinking on the U.S. and warning emerging economies against complacency
- Date: 11th October 2012
- Summary: TOKYO, JAPAN (OCTOBER 10, 2012) (REUTERS) ENTRANCE AREA FOR IMF WORLD BANK MEETINGS SIGN READING IN ENGLISH: "2012 TOKYO ANNUAL MEETINGS" POLICE IN FRONT OF SIGNS IMF FINANCIAL COUNSELLOR AND DIRECTOR OF MONETARY AND CAPITAL MARKETS DEPARTMENT, JOSE VINALS, BEING INTERVIEWED VINALS' EYES (SOUNDBITE) (English) IMF FINANCIAL COUNSELLOR AND DIRECTOR OF MONETARY AND CAPITAL MARKETS DEPARTMENT, JOSE VINALS SAYING: "The more time that goes by without a complete solution, the more are the eventual costs for everybody of resolving the crisis." MORE OF VINALS BEING INTERVIEWED (SOUNDBITE) (English) IMF FINANCIAL COUNSELLOR AND DIRECTOR OF MONETARY AND CAPITAL MARKETS DEPARTMENT, JOSE VINALS, SAYING: "The safe haven is one reason, but markets may be supremely confident on the ability of the political system in the U.S. to deliver an agreement. But is it supreme confidence or is it complacency? And is there room for disappointment? So lets not disappoint markets. Lets have a political compromise, to avoid these very tough and sudden fiscal contractions happening in the U.S. economy that will bring it into recession and which will send shockwaves, negative shockwaves, to the rest of the world economy." REPORTER TALKING TO VINALS (SOUNDBITE) (English) IMF FINANCIAL COUNSELLOR AND DIRECTOR OF MONETARY AND CAPITAL MARKETS DEPARTMENT, JOSE VINALS, SAYING: "We are also encouraged by the steps being taken in the context of reducing the budget deficit in a context of very low growth, this is a very challenging task. I think that Spain is doing important things, and whether this should be supported also by the ECB's OMT mechanism is up to the Spanish authorities." MORE OF VINALS BEING INTERVIEWED VINALS' HANDS (SOUNDBITE) (English) IMF FINANCIAL COUNSELLOR AND DIRECTOR OF MONETARY AND CAPITAL MARKETS DEPARTMENT, JOSE VINALS, SAYING: "Vigilance is necessary and measures are necessary in order to deal with these financial vulnerabilities so that they do not lead into problems later on. So there is not room for complacency either in emerging markets." VINALS BEING INTERVIEWED
- Embargoed: 26th October 2012 13:00
- Keywords:
- Location: Japan
- Country: Japan
- Topics: International Relations,Economy
- Reuters ID: LVA2KRRYCDKZ0WUI0IDT3VSO0O3H
- Story Text: International Monetary Fund director Jose Vinals warned on Wednesday (October 10) the longer it takes to resolve the current financial crisis the more expensive it will become.
Jose Vinals, director of the IMF's monetary and capital markets department and the main author of the financial stability report, told Reuters in an interview that Europe's troubles should serve as a lesson to the heavily indebted United States and Japan that delaying the necessary policy adjustments until markets force their hands would lead to harsher economic outcomes.
"The more time that goes by without a complete solution, the more are the eventual costs for everybody of resolving the crisis," Vinals said.
The IMF released a report ahead of the IMF Tokyo meeting that said the euro area's debt crisis was the main threat and the risks to global financial stability had risen in the last six months, leaving confidence "very fragile".
This adds to the gloomy backdrop ahead of the IMF's semi-annual meeting to be held in Tokyo later this week.
Vinals also warned against too much dependence on the U.S. to deliver a solution to all the problems.
"The safe haven is one reason, but markets may be supremely confident on the ability of the political system in the U.S. to deliver an agreement. But is it supreme confidence or is it complacency? And is there room for disappointment? So let's not disappoint markets. Let's have a political compromise, to avoid these very tough and sudden fiscal contractions happening in the U.S. economy that will bring it into recession and which will send shockwaves, negative shockwaves, to the rest of the world economy."
Vinals was, however, positive on Spain overall.
"We are also encouraged by the steps being taken in the context of reducing the budget deficit in a context of very low growth, this is a very challenging task. I think that Spain is doing important things, and whether this should be supported also by the ECB's OMT mechanism is up to the Spanish authorities," he said, adding that caution was still necessary.
"Vigilance is necessary and measures are necessary in order to deal with these financial vulnerabilities so that they do not lead into problems later on. So there is not room for complacency either in emerging markets," he said.
Under current policies, the IMF estimated European banks would shed 2.8 trillion U.S. dollars in assets between the third quarter of 2011 and the end of 2013, higher than the 2.6 trillion U.S. dollars it had predicted in April, further squeezing credit availability.
And if European policymakers do not fulfil promises to establish a common bank supervisor, and peripheral countries do not follow through with adjustment programmes, the costs could be even higher, with 4.5 trillion in lost assets, and additional impacts on employment and investment. Supply of credit in the periphery could tumble by 18 percent.
Risks from the euro zone could also spill into emerging markets, where growth is already slowing. Countries in central and eastern Europe are the most vulnerable to financial shocks, given their exposure to the euro zone and their own entrenched external debts, the report said. - Copyright Holder: REUTERS
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