Sunday, August 28, 2011

IMF's Lagarde: European banks need "urgent recapitalization"

by Calculated Risk on 8/28/2011 08:50:00 AM

From the International Monetary Fund Managing Director, Christine Lagarde: Global Risks Are Rising, But There Is a Path to Recovery. Some excerpts:

The global economy continues to grow, yet not enough. Some of the main causes of the 2008 crisis have been addressed, yet not adequately. There remains a path to recovery, yet we do not have the luxury of time.
...
Developments this summer have indicated that we are in a dangerous new phase. The stakes are clear: we risk seeing the fragile recovery derailed. So we must act now.
...
[European] banks need urgent recapitalization. They must be strong enough to withstand the risks of sovereigns and weak growth. This is key to cutting the chains of contagion. If it is not addressed, we could easily see the further spread of economic weakness to core countries, or even a debilitating liquidity crisis. The most efficient solution would be mandatory substantial recapitalization—seeking private resources first, but using public funds if necessary. One option would be to mobilize EFSF or other European-wide funding to recapitalize banks directly, which would avoid placing even greater burdens on vulnerable sovereigns.
Sounds like the TARP.

Yesterday:
Summary for Week Ending August 26th (with plenty of graphs)
Schedule for Week of Aug 28th