"If we had met a year ago, we'd be meeting during one of the most frightening moments of the crisis, when the future was uncertain. Today, we're less scared, but we're still not yet sure about the future," said Governor of the Bank of Israel Prof. Stanley Fischer today at 2009 President's Conference plenary session, "The global economic crisis". He opened the session by introducing the other speakers.
Fischer added, "We're still not sure what the long-term consequences of the crisis will be on growth, the dollar, the global economy in general, and the US economy in particular. How can we carry out the reforms necessary to ensure that there will be no more crises?"
The other speakers at the plenum were France's Minister of State for Foreign Trade Anne-Marie Idrac, Rothschild Group executive chairman Baron David de Rothschild, Deutsche Bundesbank President Axel A. Weber, and former World Bank President James Wolfensohn.
Baron David de Rothschild said, "This crisis began with a lot of drama. One of the biggest US banks crashed, creating a serious crisis in the financial system, which was very close to collapse. Fast action by the world's central bankers, who injected liquidity into the markets, saved the situation. The financial crisis led to a recession."
The Baron added, "Today, we're seeing recovery in the stock markets, but do these rises in the market reflect the real economy? Capital injections, improvement in credit terms, and low interest rates are supporting the market recovery, but at the same time, unemployment is still rising. The recovery in China has a "V" shape, in Europe you're talking about an "L", but we're headed for a "U", not a "W", which would lead us to again see lower levels in the market."
Looking ahead, Baron de Rothschild said that it was necessary to contain the bad habits of the financial system. "Fundamentally, the banks will have to meet higher levels of regulation and change their behavior. It's easy to think that we'll return to where we were before the crisis, but I don’t think that will happen so fast. We still have a hard road ahead before we can say that the crisis is behind us. To overcome the deficits created in countries after the incentives packages, governments will have to raise taxes, boost savings, and cut costs."
Baron de Rothschild believes that Israel is a good example of how to deal with the crisis. He noted that leverage is now considered a dirty word, but that need not be the case. "It is an important tool for growth, but it has to be used carefully," he said.
Published by Globes [online], Israel business news - www.globes-online.com - on October 22, 2009
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