IMF Head : “The crisis is not over”

“There is some good news, but the crisis is not over” said IMF Head Dominique Strauss-Kahn, meeting with trade unionists, business leaders, academics and the Italian Labour Minister in Rome last Friday. “There is no recovery until there is recovery of employment”, he told the Italian media afterwards.

Sharing the platform with Strauss-Kahn, ITUC General Secretary Guy Ryder agreed that the G20 had brought the world “back from the brink” “but after the rhetoric of desperate men in October 2008, it is back to business as usual” said Ryder. “The financial sector is showing just 12 months later a capacity for collective amnesia”, he added.

Strauss-Kahn said the time-lag between recovery of the financial sector and recovery of the real economy would be on average 12 months (10 months in some countries, 14 months or more in others), and that recovery was likely to be sluggish at best.

Strauss-Kahn recognized in response to the criticism of ITUC, EI and Global Campaign partners that IMF conditionalities continue to be an issue in countries receiving IMF bail-outs, particularly low-income countries. Giving a detailed explanation of the IMF’s approach, he acknowledged that more needed to be done to create “social conditionality”. He said that 80 percent of IMF missions now met with national trade unions. (I noted the need for EI member organizations to make sure they are included in these national consultations). He now met personally on a regular basis with a group of 30 NGOs, including Oxfam, and was also reaching out to the academic community.

Strauss-Kahn also warned against premature moves by governments towards “exit strategies”, which mean attempts to draw back public debt used to finance stimulus packages. These “exit strategies” will pose major problems for the public sector down the track, because they will put immense pressure on public sector budgets.

As the world economy emerges from the biggest crisis in 80 years, resources for quality public services will become one of the defining issues of our time. Strauss-Kahn created a surprise by announcing that even the IMF had begun a study of taxation on international financial transactions, a concept that had been dismissed by orthodox economist before the crisis. The Global Unions’ proposed study on Corporate Taxation and Resources for Quality Public Services could not be more timely.

Speaking on the previous day in Rome on behalf of TUAC, I pointed out that social dialogue with unions and industry was considered to be normal when the Marshall Plan was launched for post-war reconstruction in Europe. “It should be just as normal for trade unions to be at the table of the G20 today, and especially at G20 created bodies like the Financial Stability Board (FSB)” I suggested, or as Guy Ryder put it “the Financial Secrecy Board”. So, yes, progress to report from Rome, but there is much hard work still to be done, with systemic advocacy by Global Unions linking closely with national action through their affiliates.