At another time, the fate of the head of the International Monetary Fund would not have mattered too much. But photos of Dominque Strauss-Kahn being led away in handcuffs by
And with good reason. The IMF, along with the European Union and the European Central Bank (ECB) is centre stage in a drama that has all the makings of an unravelling of the global financial system that would put the 2008 crisis in the shade.
Strauss-Kahn was due to hold talks in Europe today over the details of financial support to
Most economists believe that
Earlier this month, José Manuel González-Paramo, an ECB executive board member, said a Greek debt restructuring would be a disaster for the eurozone. There would also be knock-on effects on the balance sheets of banks in
"A restructuring would have legal and systemic consequences that are difficult to calculate right now but would in all probability be bigger than after the collapse of Lehman Brothers," he said. Just in case anyone needs reminding, when Lehman Brothers filed for bankruptcy in September 2008, it triggered a seizure at the heart of the global financial system and led to the deepest recession since the 1930s.
The country's debt has spiralled to 142% of national income.
At moments of crisis, the role of individuals like Strauss-Kahn – who played a key role in brokering help for
As a former French finance minister, Strauss-Kahn personally knew most of the key leaders and officials managing the crisis. He was also due to challenge Nicolas Sarkozy for the French presidency next year on behalf of the country’s Socialist Party. That now seems improbable, leaving Sarkozy to walk home.
And if you think the financial crisis is confined to
If you’ve got any spare cash, it might be a good time put find a suitable mattress.