Erkki Liikanen in Washington: State of world economy "unusually stable"

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Bank of Finland Governor Erkki Liikanen took part in a meeting of the International Monetary Fund and the World Bank for the first time as head of the Finish central bank.
      Nevertheless, he is quite familiar with Washington DC , and the people there. As Finland’s Minister of Finance he attended IMF and World Bank meetings in 1987 - 1989.
     
Liikanen spoke on behalf at the gathering of the Nordic and Baltic group, taking strong stands on a number of questions facing international financial institutions and their fields of operations.
      One of the key topics was the state of the world economy, which Liikanen praised as "unusually stable", noting that growth is taking place almost everywhere.
      He also sees some risks, the top of which are the price of oil and the considerable US deficits.
      Liikanen told the delegates at the meeting that he sees the situation as conducive to dealing with global imbalances, moving towards more sustainable fiscal positions, and pressing ahead with structural reform. He sees improving productivity to be the main goal of reform, and the only way to increase the number of jobs.
      To this end he called for more efficient competition and a focus on research and development.
     
The main "internal" issue for international financial institutions was the question of Third World debt.
      The UK proposed writing off the debt, saying that the financing for the move could be achieved by valuing the gold reserve in the IMF books closer to its present value. The rest of the money would come from rich member states.
      The proposal was neither accepted nor rejected, but was put aside for further consideration.
      Liikanen saw the proposal as some kind of financial trickery.
      "We should always check and see if the emperor really has any clothes. In this case we must see what kinds of extra resources we are really ready to commit to forgiving the debt. This proposal raises many questions", Liikanen said.
     
Erkki Liikanen noted that the Nordic Countries had always taken development aid very seriously. "Ultimately the solution requires a real increase in resources. The solution is not to be found in new financial instruments", he emphasised.
      Liikanen was also critical of the present crisis resolution system within the IMF, which in his view focuses too much on saving the money of individual lenders.
      "We should never create the impression that the state - or in the case of international crises, the IMF - will come and take care of things. Everyone bears his or her own risks", said Bank of Finland Governor Erkki Liikanen in an interview with Helsingin Sanomat after the end of the meeting.
     
Erkki Liikanen also noted that his predecessor at the Bank of Finland, Matti Vanhala, who died last week, had been on the board of the IMF in the 1970s. Liikanen said that many people in Washington remember Vanhala, and that they were affected deeply by his death. "He was a very respected person in these circles."


Previously in HS International Edition:
  Former Bank of Finland head Matti Vanhala dies at 58 (30.9.2004)
  Commissioner Liikanen appointed by President Halonen to head Bank of Finland (23.4.2004)

Helsingin Sanomat