IMF chief warns global economic co-operation is faltering

8 October 2010

Dominique Strauss-Kahn, the head of the International Monetary Fund (IMF), has warned that the economic co-operation demonstrated by governments around the world in response to the financial crisis is waning.

He stated that there are growing signs that nations are pursuing protectionist policies, in which their currency is used as the chief "weapon", reports BBC News.

"The willingness of the countries to work together, which was very strong at the climax of the [financial] crisis is not as strong today," Mr Strauss-Kahn stated.

"'Currency war' might be too strong, but the fact the countries want to find domestic solutions to a global problem is really a threat to the recovery."

In recent weeks, China has been criticized for undervaluing the yuan in Europe and the US, with White House spokesman Robert Gibbs calling for the country to "take steps" to address the issue.

China has been accused of keeping the yuan at a deliberately low level to aid its own exporters at the expense of rivals in the US and other countries around the world.

Mr Strauss-Kahn added his voice to the calls for China to increase the value of its currency, but noted that this has been the position of the IMF for a number of years.

"[China] will go in this direction - the question is the speed. Certainly they can go faster than they are today," he stated.

"On the other hand, we shouldn't believe that all the imbalances in the economy today will be solved if the value of yuan was changed."

Earlier this month, an IMF report warned that weaknesses in the global financial system may hit economic recovery around the world.

It stated that there has been a "setback" to the progress towards financial stability since April 2010, partly as a result of the turmoil in the European sovereign debt markets.

By Tony Aynsley

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