Developing countries face an additional problem

Just the inter-bank credit a bit loose with the announcement by the developed financial bailouts of bad economic indicators have made fall scholarships. Now, the pressure on developing countries as some had believed "decoupled" from the rest of the world intensified while they are forced to repay their debts and assets must be transferred.

Consumers, businesses and countries around the world are gripped by fear. Talking about, nor a recession of average intensity of developed countries, but aggravated global depression. Discouragement occurred, with the sense that it can do nothing to stop things.

What is going on Were the measures taken to strengthen the financial system two weeks ago, bad Absolutely not. The injection of liquidity, the recapitalisation of banks, the greater standardization of the guarantees of deposits in the developed countries, all these measures were fair and necessary. But it was that of the first phase.

In developed countries, the depreciation of the assets and, more broadly, the fear of the future were shattered confidence in the economy. Consumption decreased and businesses have reduced their investments. The financial crisis has caused a severe decline in demand, phenomenon described by economists "Keynesian recession."

To restore the confidence, the only solution is to resort to macroeconomic tools, to encourage the application and maintain productivity. Monetary policy can be useful in countries where interest rates remain high, but the drying out of the credit risk of limiting the effectiveness of this measure. Therefore, it is fiscal policy to play the leading role. Expansionary fiscal policy is not without risk because it contributes to public debt, pushing by risk. But, to the point where we are, the benefits of such a policy are higher than the costs for countries whose debt is bearable.

Developing countries face an additional problem. It is not only for them to cope with the threat of declining exports and confidence in their economies; they are the victims of this financial crisis, which began in the United States, is transported in Europe, and turn their borders at the end of string.

Foreign banks reduce their credits. Foreign investors repatriate their funds on an unprecedented scale. Ironically, the measures adopted to solve the crisis in the developed countries are also those who incite to bring back the money in the country of origin, which complicates the situation in developing countries.

To strengthen their financial systems and their aggregate demand, emerging countries should be prepared to take similar measures to those adopted by developed countries. But the recent prosperity of many of these countries comes them from their openness to international capitalism. A brutal judgment of these financial flows is a hard blow and involves challenges that these countries cannot face alone.

Developed countries must therefore be prepared to provide the funding required, and to do so at a level without equal. Otherwise, we run to insolvency, the placing under supervision of banks, to protectionism. Which would represent a return back to these countries and the world economy, and this for years.

The IMF has the resources to commit approximately $ 250 billion. We have action of internal procedures and structures that allow us to quickly provide financial resources, with a conditionality limited to the adoption of anti-crisis policies.

In addition, the Fund is to develop a financial mechanism to unblock funds urgently for emerging countries whose productivity and economic fundamentals are strong and sound economic policies.

This should recreate the basis for a return of confidence to investors. But, given the importance of capital flows, I appeal to the Governments and central banks of developed countries to provide funding, at the same time the IMF anti-crisis programs. I am also convinced of the need to find a way to mobilize the financial resources of the countries which have significant reserves of foreign exchange. The Fund will play its role, but all these entries are required to strengthen the credibility of the global response coordinated to the crisis.

We must also anticipate especially for low-income African countries. Given their modest participation in international financial markets, these countries have been somewhat from the storm so far. But this is a scary and probably precarious calm.

Many low income countries suffer the collapse of commodity prices. Some countries, including those that were emerging, could be denied the obtaining of foreign capital. They also will need assistance from the international community. The loans allocated by the IMF and international banks for development, as well as the maintenance of the support of the donors at current levels, will be vital if we want to avoid new human tragedies.

The dynamics of fear is potentially catastrophic, but this dynamic may be broken. Regardless of the disorders of the financial system, the tremendous advances over the years, in terms of technology, productivity and social achievements the real fundamental constitute a genuine legacy of the power of globalization as a positive force. It may be that it is too late to avoid a recession in developed countries and a slowdown in emerging and poor countries. But it is not too late to avoid a global depression.