The financial crisis could even lead to a war…
…Says the head of the International Monetary Fund, adding that the only solution lies in cleaning up the financial sector.
March 24, 2009 10:09 by Aarti Nagraj
The financial sector has certainly gotten smaller; the ILO says that announced layoffs (as opposed to layoffs companies have failed to register) in the sector between August 2007 and 12 February 2009 total 325,000. The organization says that these figures are unlikely to include layoffs from independent mortgage brokers, contractors, and several small financial firms who may have gone out of business.
In a report issued last month, the ILO says that bail-out plans of the financial sector are insufficient, thanks to a “vicious circle of rapidly declining confidence that leads to lower
demand, output and employment, which in turn further depresses confidence. What is needed is a global, coordinated stimulus package that breaks this vicious circle and responds to the current problems of failing capital markets, drying-up of credit and massive job losses.”
The ILO also says that apart from major restructuring efforts, banks and financial institutions need to concentrate on their core businesses. This will require incentives to move towards less risky activities and avoid excessive risk taking, and calls for changing corporate governance practices in the banking sector.
According to the IMF and the ILO, the key to solving the crisis lies primarily with the financial sector that created it. That’s a huge responsibility. Will they be able to get themselves and the rest of the world out of the crisis fast enough to prevent a war?
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