The IMF argues that the crisis – now in its fifth year – has moved into a new, more political phase (phase 1 was the US private sector subprime crisis, phase 2 the the systemic banking crisis that engulfed Europe as well as the US, and phase 3 the sovereign debt crisis). The clear message is that central banks have done as much as is reasonably possible…politicians now have to live up to their responsibilities, make the tough choices and see the job through.
The IMF’s latest Global Financial Stability Report makes four key recommendations….
- coherent policy solutions are needed to reduce sovereign risks in advanced economies and prevent contagion
- credible efforts are required to strengthen the resilience of the financial system and guard against excesses
- emerging market policymakers need to guard against overheating and a buildup of financial imbalances through adequate macroeconomic and financial policies
- the financial reform agenda needs to be completed as soon as possible and implemented internationally in a consistent manner