Tuesday, January 22, 2008

Global economic crisis 'serious': IMF Chief

Investors skeptical of U.S. stimulus package, says IMF's Strauss-Kahn; an American recession would spread globally, he warns.

PARIS (AP) -- The head of the International Monetary Fund called the global economic situation "serious" and said markets worldwide had responded skeptically to a U.S. stimulus plan.

Dominique Strauss-Kahn stressed that a U.S. recession would affect economies across the globe.

"The situation is ... serious," said Strauss-Kahn following a meeting in Paris with French President Nicolas Sarkozy. "All the countries in the world are suffering from a slowdown in growth in the United States."

He said investors were skeptical that an economic stimulus plan presented last Friday by U.S. President George W. Bush would shore up the economy, which has been battered by problems in its housing and credit markets. The plan, which requires approval by Congress, calls for about $145 billion worth of tax relief to encourage consumer spending.

"It appears that the markets did not appreciate the packet proposed by President Bush," he said, adding that the negative reactions were "perhaps to be expected."

Stocks fell sharply worldwide Monday following declines on Wall Street last week amid investor pessimism over the U.S. government's stimulus plan. U.S. markets were closed Monday, but the downbeat mood from last week's market declines in New York circled through Europe, Asia and Canada. In Hong Kong, the blue-chip Hang Seng suffered its biggest percentage drop since the Sept. 11, 2001, terror attacks.

Strauss-Kahn, a Frenchman who took the reins at the IMF late last year, said he and Sarkozy discussed possible French responses to the situation in the United States.

"When [Sarkozy] says 'there are risks to doing something but there are even more risks in not doing anything,' I think he's right," Strauss-Kahn said. He did not elaborate on what measures the French might take. To top of page

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