Europe, US face 10 years of slow growth:UK's Brown
Updated: 2011-09-16 18:26
DALIAN - Europe and the United States could face 10 years of slow growth and high unemployment if a global solution for the euro zone debt crisis is not implemented soon, former British Prime Minister Gordon Brown said on Friday.
"Unless there is global coordination...I foresee 10 years of low growth in Europe and America, I foresee very high levels of unemployment and I foresee a failure of coordination that will lead in the end to greater protectionism," Brown told reporters and participants at the World Economic Forum in Dalian.
The sovereign debt crisis gripping Europe has seen Greece, Portugal and Ireland forced to take bailouts, piled bond market pressure on Italy and Spain and raised fears of a banking crisis as wholesale funding evaporates on concerns about lenders' potential exposure.
The European Central Bank said on Thursday it would work with other major central banks to offer three-month dollar loans to commercial lenders to prevent money markets freezing up.
However, some investors said more needed to be done, including more aggressive capital injections for banks that are overexposed to heavily indebted euro zone countries.
"You cannot begin to solve the European problem unless you understand it is a banking problem, a growth problem, the inability of the European economies to grow out of a recession, as well as being a fiscal problem," Brown said.
Brown, who was finance minister for 10 years before becoming prime minister in 2007 and won praise for his handling of the early stages of the global economic crisis in 2008/09, said the crisis should be solved by having a "global agreement" on how the world economy should grow.
Such an agreement would need to address the rebalancing of exports and consumption between developing countries, such as China and India, and developed countries, such as the United States.
"You will need an international agreement, not just a euro area agreement, to sort out the problems that Europe now faces and the IMF will be involved in some stage in this in my view," Brown said, adding that he agreed with the widely held view that the European Financial Stability Facility, Europe's bailout fund, of 400 billion euros was insufficient.
A growing number of policymakers, as well as market economists, are convinced it is only a matter of time before Greece, which keeps falling behind on fiscal targets agreed with its international creditors, will have to default.
But British insurer Prudential's Chief Executive Tidjane Thiam said he did not see a Greek default on the cards.
"I don't think they will default, I think the market thinks they will default. I don't think they will because the consequences on the banks in particular are too significant, particularly to France and Germany," Thiam said.