Gloom Greets IMF, World Bank Meetings
MELISSA BLOCK, host:
From NPR News, this is ALL THINGS CONSIDERED. Im Melissa Block.
Today, Greece formally asked its European neighbors and the International Monetary Fund for an emergency rescue package, $56 billion worth. It was a an embarrassing move for the Greek government, which had hoped to delay a bailout request until after this weekend's IMF meeting here in Washington. But investors had already begun betting that Greece's problems could lead it to bankruptcy.
As NPR's Tom Gjelten reports thats bad news for Greece and for any other government struggling with debt burdens.
TOM GJELTEN: The IMF and World Bank annual spring meetings here could have been a time for celebration. When finance ministers gathered here last year, they were looking at shrinking world output and sharply rising unemployment. Since then, the global economy has recovered faster than anyone thought it would. Growth forecasts have been revised upward.
But Greece's problems are casting a shadow over this weekend's meetings. Other governments with big debt loads worry they could be next. One set of concerns has been replaced by another.
IMF Research Director Olivier Blanchard pointed this out in a news conference.
Dr. OLIVIER BLANCHARD (Director of Research, International Monetary Fund): A year ago, the risk was that private demand would collapse, leading to another Great Depression scenario. So, the priority was to implement fiscal stimulus programs and avoid this catastrophic scenario. This we did. One year later, however, the risk has shifted location.
GJELTEN: There's a whole story in the statement that risk has shifted location. It sums up whats happening in the global economy. A year ago, the crisis was located in the private sector; banks were failing, factories were closing, consumers weren't spending. The situation on that front is now better.
But now the problems are in the public sector, whole governments are in danger of going bankrupt. Greece is the perfect example. New data released yesterday showed the country now owes an amount equal to 115 percent of everything its economy produces each year. A bailout from the IMF and the European Union would help Greece make its debt payments, and officials here expect the package will be approved.
But the IMF managing director Dominique Strauss-Kahn yesterday said the Greeks themselves will have to make big sacrifices.
Dr. DOMINIQUE STRAUSS-KAHN (Managing Director, International Monetary Fund): I mean, they need to solve the problem in which they are. There is no way, no silver bullet to solve it in an easy manner.
GJELTEN: Greece is an extreme case. Its creditors lost faith in its economic management. But debt is a problem even for many apparently rich countries, if not now then in the years ahead when governments face rising pension and health care costs.
Uri Dadush is director of International Economics at the Carnegie Endowment for International Peace.
Dr. URI DADUSH (Director, International Economics, Carnegie Endowment for International Peace): Pretty much everywhere in the industrialized world, the issue of large budget deficits, rising debt levels and the aging in demographic trends are all pointing in the wrong directions.
GJELTEN: Note, he says, the industrialized world. The developing countries like China, Brazil and India have come through the economic crisis in better shape. They dont have the debt burdens that European countries and even the United States have. And they are rapidly gaining ground on the rest of the world.
Dadush, a former senior official at the World Bank, says the trend actually began years ago.
Dr. DADUSH: The developing countries are continuing to grow 3, 4 percent faster than the industrial countries. Of course, 3 or 4 percent difference has already been going on for close to 10 years. And if you're talking about another 10 or 20 years, which I think is likely, then you're talking about historic transformation.
GJELTEN: Old geoeconomic distinctions no longer apply. We used to say that Western industrialized countries were the First World. The Second World was the communist countries, the old Soviet bloc. And the rest, the poor countries neither in the East nor the West, were the Third World.
But Robert Zoellick, the World Bank president, says last year's global financial crisis showed how the economic landscape has changed.
Dr. ROBERT ZOELLICK (President, World Bank): If 1989 saw the end of the Second World with communism's demise, then 2009 saw the end of what was known as the Third World.
GJELTEN: This is not to make light of the extreme poverty still evident in Africa and elsewhere, but the events of the past year mean countries in the old First World, from Greece to Britain to the United States and Japan, can no longer be so confident they have the healthiest economies and the best chances of continued prosperity.
Tom Gjelten, NPR News, Washington.
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