The worst part of the financial crisis may still be ahead of us, and in the coming months, leading financial institutions may find themselves facing difficulties, said International Monetary Fund Executive Director Dominique Strauss-Kahn on Wednesday.
He warned that the risks arising from the crisis are pressing on the global economy, despite both developed and developing countries showing signs of resilience. "This is a very serious financial crisis," said Strauss-Kahn in a statement to reporters after a meeting with finance ministers and central bank governors from Gulf countries."The consequences for some financial institutions we will only see. We must expect that in the coming weeks or months, new financial institutions may face problems."
The day before, the U.S. government announced an $85 billion aid package for American International Group Inc. (AIG) to prevent the bankruptcy of the insurance giant and calm shaken global markets."We expect further strengthening of pressures and uncertainties, but we remain confident in the recovery of the global economy in 2009," said Strauss-Kahn. "It is important to see the impact of the crisis on the real economy, but it has also proven to be very resilient in both developed and developing countries," he added.
The U.S. government threw a lifeline to AIG two days after it refused to do the same for Lehman Brothers, pushing that investment banking giant into bankruptcy. The U.S. central bank, the Fed, decided on the move with AIG out of fear that its collapse could cause far-reaching damage to the global financial system, although some market players believe that this only provided short-term relief with long-term harmful consequences. (H)
