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Paris, Monday, February 14, 2000
'Alarm Bell' From Departing IMF Chief
Camdessus Sees Risk of New Financial Crisis if Efforts at Reform Falter

By Thomas Crampton International Herald Tribune

BANGKOK - The world economy has entered a ''dangerous period of twilight'' characterized by excess euphoria and complacency while a faulty global financial architecture is still in place, the International Monetary Fund's senior official warned Sunday. In an interview after his final official speech before his planned retirement, Michel Camdessus, the managing director of the IMF, said the world economy was showing many symptoms similar to those seen in East Asia before that region's recent economic crisis, including a failure to take note of the reality of the situation.

''Of course, things never reproduce in an identical way,'' Mr. Camdessus said. ''But I am ringing the alarm bell to our member countries to tell them that we run the risk of a new financial crisis.''

Such a crisis can only be averted by individual countries following through on the ''nitty-gritty'' of reforms encouraged over the past few years by the Fund, he said.

A former governor of the French central bank, Mr. Camdessus led the International Monetary Fund through 13 turbulent years that included numerous bailouts of developing economies around the world.

He was in Bangkok to address the United Nations Conference on Trade and Development, a gathering that includes some of the world's poorest nations.

Mr. Camdessus dismissed much criticism of the Fund as ''simply stupid'' and counterproductive.

''By delegitimizing the IMF or the World Bank, you delegitimize the institutions which best serve the children of the world,'' he said.

The key to avoiding the pain of future financial crises is the rapid execution of changes that have already been agreed upon, Mr. Camdessus said.

''Reforms must be implemented not just in a beautiful declaration on the occasion of the finance minister or central banks meetings in Washington,'' he said.

''We are in a dangerous period of twilight between when the principles are agreed upon and when they are acted upon at the local level.''

Speaking about the U.S. economy, Mr. Camdessus said its low rate of savings, rapidly growing current-account deficit and high stock prices were cause for concern.

''There are also worrying vulnerabilities in other parts of the world,'' he added, pointing to structural rigidities in Europe, the slow process of corporate and financial restructuring in Asia and the ineffective addressing of poverty in Africa.

''All of this combined with complacency could lead to delays in finalization of changes to the world's financial architecture,'' Mr. Camdessus said.

''But even more seriously, this could lead to delays at the country level of principles adopted at global level,'' he said.

While much work remains, there has already been substantial progress in encouraging transparency and the monitoring of financial institutions, Mr. Camdessus said at a news conference.

''Five years ago in the central banking business, the virtue was secrecy, and they competed to see who could keep things more secret,'' he said. ''Now they are completely in the other direction, and that is a fundamental change for the prevention of crisis.''

He said further changes would be needed as soon as the current modifications were implemented, adding that the need for change would remain constant.

A final taste of the controversy that surrounds the IMF was delivered to Mr. Camdessus early Sunday when a protester breached tight security to plaster a puffy cream pie stuffed with red fruit paste on his face.

The pie-thrower identified himself as Robert Naiman of Washington. He said the pastry was a ''slight - and sweet - embarrassment, compared to the tremendous suffering the Fund has inflicted on the people of the South under the leadership of Mr. Camdessus.'' He was apparently referring to the poor nations grouped near or below the Equator.

Mr. Camdessus, who was unhurt, took the attack in good humor.

''I like patisserie, you know,'' he said.

Upon leaving the gathering, Mr. Camdessus's motorcade passed near several hundred protesters, some of whom denounced the IMF. Others carried banners saying that globalization only helped rich countries.

One change that he said should be made in the global economic architecture is the expansion of the high-profile Group of Seven summit meetings of the world's wealthiest nations to include as many as 30 countries.

''I have gone public with this proposal after talking with several G-7 heads of state, with several of them telling me that it is an excellent idea,'' Mr. Camdessus said.

''The G-7 realize that while they represent 45 percent to 50 percent of the world's GNP, they cannot take all decisions applying to the entire world.''

Once his term of office expires Tuesday morning in Bangkok, Mr. Camdessus said he planned a lengthy holiday at an undisclosed location ''where I will not see journalists.'' He said he had no plans for future employment and refused to comment on the protracted negotiations over his successor.

Stanley Fischer, deputy to Mr. Camdessus, will take over until a successor is chosen. Caio Koch-Weser, the German deputy minister of finance, appears to be the favored candidate.

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-- Maher Shalalhashbaz (mahershalalhasshbaz@mail.com), February 16, 2000

Answers

Try telling an addict to give up his cocaine, or cigarettes, or alcohol. Try telling a fornicator to give up his nightlife. The banks, the governments, the people are addicted to debt and gambling ( read stock market investments the past decade). Going through withdraw will be rough for us all....the addicts, and those of us next to them while they thrash and scream and riot.

-- wrecks (on@the.road.ahead), February 16, 2000.

Thanks for the post. Good information. There probably isn't much any of us can do about the world economy. What we can do though, is position ourselves to be less vulnerable if the economy does tank.

-- suzy (suzy@nowhere.com), February 16, 2000.

I have been predicting a crisis for 33 years now, and have never had a pie in my face. What am I doing wrong???

-- Joseph Almond (sa2000@webtv.net), February 17, 2000.