IMF Warns That New Bailouts Would Imperil Democracy
The head of the International Monetary Fund warned the financial elite yesterday that public reaction would not tolerate new government bailouts.
The Telegraph reported:
Dominique Strauss-Kahn, head of the International Monetary Fund, has warned the financial elite that its behaviour has stretched the patience of Western democracies to near snapping point, precluding any possibility of a second rescue if recovery falters.
Public opinion will not tolerate any further bail-outs, he told the CBI’s annual gathering in London. “The political reaction will be very strong, putting some democracies at risk,” he said.
Speaking in near apocalyptic tones, Mr Strauss-Kahn – a French socialist, with an eye on the Élysée – said public anger was so great that it would be almost impossible for French or German leaders to orchestrate another rescue if the credit system seizes up again.
It will be years before the “man on the street” is willing to countenance such measures, especially after the stunning lack of restraint shown by bankers over bonuses. “The financial sector needs to contribute both to the costs of the crisis and to reduce recourse to public funds in the future,” he said.
The IMF chief backed Gordon Brown’s strategy of maintaining stimulus until recovery is secure, under-cutting Tory calls for quicker moves to restore discipline. “It is difficult to claim that the crisis is over when unemployment is at historic highs and getting higher still.”