The IMF yesterday said it was ready to help riot-torn Egypt and other nations stricken by chronic unemployment, but told governments to tackle economic strains or risk instability and even “war”.
International Monetary Fund chief Dominique Strauss-Kahn also said rising food prices could have “potentially devastating consequences” for poorer nations, and warned that Asia’s fast-growing economies risked a “hard landing”.
Overall, he told an audience in Singapore, widening imbalances across and within countries were sparking tensions that threaten to derail the fragile global economic recovery – and could even spark armed conflict.
Mr Strauss-Kahn said he did not want to comment on the political turmoil in Egypt, with President Hosni Mubarak facing the biggest challenge to his long tenure in charge of the most populous Arab nation.
“But clearly the situation in Egypt is the kind of situation that could have been expected not only in Egypt, when you see the problem created by the high level of unemployment,” he told a questioner after giving a speech.
“Now the question is how to rebuild this, that’s not only true for Egypt, (it) can be true also for countries where you didn’t have this kind of unrest but are almost in the same situation.
“And of course the IMF is ready to help in defining the kind of policy that could be put in place.”
In his speech, Mr Strauss-Kahn said high unemployment and income inequality were a “strong undercurrent of the political turmoil in Tunisia and of rising social strains in other countries”.
Nationwide demonstrations last month led to the ouster of Tunisian strongman Zine El Abidine Ben Ali, while massive street protests raging in Egypt are seeking an end to Mr Mubarak’s three-decade rule.
“As tensions between countries increase, we could see rising protectionism – of trade and of finance,” the IMF managing director said.
“And as tensions within countries increase, we could see rising social and political instability within nations – even war.”
Mr Strauss-Kahn called anew on China to adjust its exchange rate in its own economic interest, but said he disagreed with critics in the United States and elsewhere who want a rapid revaluation to the yuan.
He said the US government itself should not have a problem financing its massive debt, and downplayed fears over Japan’s debts after a downgrade last week by Standard & Poor’s.
But for the global economy as a whole, Mr Strauss-Kahn struck a worried tone.
“While the recovery is under way, it is not the recovery we wanted,” he said.
“It is a recovery beset by tensions and strains – which could even sow the seeds of the next crisis.”