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Weak Collective Action Threatens Global Credit Crisis

The U.S. financial meltdown has become a globalized crisis, spreading to Europe and emerging markets. The managing director of the International Monetary Fund explains the importance of restoring confidence among banks and consumers, coordinating efforts among countries and the IMF's role.

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  • JIM LEHRER:

    Now, more on the international dimensions of the financial crisis, and to Jeffrey Brown.

  • JEFFREY BROWN:

    And joining me for that is the managing director of the International Monetary Fund. Dominique Strauss-Kahn is an economist and served as minister of finance in France in the 1990s.

    Welcome to you.

    Your organization issued a report today that was filled with all kinds of dire warnings. So I just want to ask you right simply at the start: How serious is the situation?

    DOMINIQUE STRAUSS-KAHN, IMF managing director: Well, obviously, the situation is very serious, not only in the United States, but also in Europe and, perhaps for the first time during the last years, in the emerging market, too.

    What we just contemplate now, as the crisis, which originated in the United States, as you see in the housing market of the United States, are now going over Europe and all the problems we have seen in the U.K., in the British banks, for instance, or in the Belgian banks, shows that it's no more a problem only in the United States, but what is probably more kind of news that emerging markets — Brazil, India, other countries — are just receiving the waves and the shock of the crisis now.

  • JEFFREY BROWN:

    Let's start in Europe, because I know you were in France recently talking with President Sarkozy. In recent days, we've seen countries take steps on their own.

    And now there's reports about a possible bailout coming out of Britain maybe as early as tomorrow. But there's been an inability to do a collective action. Why is that so hard?