Former IMF head Dominique Strauss-Kahn gave a public speech in China today, and said this about Europe’s troubles:
It appears today as a debt crisis. More than that, it is a growth crisis. Behind the growth crisis is a leadership crisis.
Strauss-Kahn resigned as head of the IMF after charges, later dropped, that he raped a hotel maid in May.
Like him or not, Strauss-Kahn’s view is hard to disagree with as Europe’s slog continues.
Markets were optimistic Friday 12/9 following an EU summit that promised more centralized budget controls and more pressure on member nations to balance budgets.
But sentiment reversed last week as the IMF said Greece was shirking its promises to reform economic policy and cut government spending.
Also IMF managing director Christine Lagarde said Europe’s crisis is escalating, and deputy assistant Treasury secretary Mark Sobel told congress about U.S. economic risks stemming from Europe.
Then Fitch became the third major ratings agency to downgrade several large banks on European contagion concerns, plus they issued a negative outlook on France.
It all led investors toward safe bets like U.S. mortgage bonds and Treasuries, which helps U.S. rates.