Olivier Blanchard admitted during an interview, that the banking problems which started in 2008 would take at least a decade to overcome, leaving a further six years of economic difficulties.
The global financial watchdog said that the severity of the banking collapse in 2008, meant it would not be easy for many countries to recover and anything less than 10 years was unlikely. But if this sounds like bad news, spare a thought for Japan; Mr Blanchard believes they will be unable to recover from the financial disaster they currently face for several decades at least.
The European debt crisis has rumbled on for some time now and despite several ‘solutions’ being heralded, none seems likely to bring about a permanent change. Mr Blanchard said that to begin to solve the problems, Germany would first have to accept a higher rate of inflation in order to strengthen its purchasing power.
The US did not escape Mr Blanchard’s scrutiny. Despite managing to avoid tumbling into another recession, the chief economist believes the western superpower has very significant financial problems to sort out, before it can move forward.
The comments from the IMF come as experts from the UK are tentatively suggesting that the recession could be over. Figures for the last three months have suggested that the economy may have expanded by as much as 0.6%, putting an end to the double dip credit crunch.
However, the economic recovery in the UK could be hampered by the financial crisis engulfing the rest of the world, primarily being sustained by the ongoing problems within the euro region. Vince Cable, Business Secretary, admitted that escaping the crisis once and for all would be ‘very difficult indeed.’