VIENNA (November 01 2008): Emerging economies will be the next to topple in the global financial crisis, the head of the International Monetary Fund Dominique Strauss-Kahn wrote in article published here on Friday. Emerging countries are facing additional problems, Strauss-Kahn wrote in a guest commentary for the daily Der Standard.
Their economies "aren't just facing falling exports and tumbling confidence," he said. "They're the latest victims of a financial crisis that started in the United States and spread to Europe and is now moving beyond Europe's borders."
Ironically, the measures taken in highly industrialised countries to resolve the crisis - such as banking bailouts - "make it more attractive for investors to recall their money back home. But it is precisely that which is making life so difficult for the emerging countries," Strauss-Kahn argued. In order to support their financial systems and overall economic demand, emerging countries also needed to take similar measures.
"But the newly acquired prosperity of many of these countries relies on access to global capital. And when this suddenly dries up, it deals a heavy blow to those countries and brings with it very major challenges, which they can't overcome on their own," the IMF chief wrote. Highly developed countries must be prepared to take over the responsibility of financing the measures "in proportions never seen before," he said. The alternative, Strauss-Kahn warned, would be widespread payment default, protectionism and banking controls.