Borg blasts US and UK over financial crisis

Swedish finance minister Anders Borg has criticized how the United States and Britain have managed the financial crisis and wants smaller countries to have more influence on the global economy.

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“Primarily in the United States and Great Britain there is unfortunately such a connection between banks and the political system, and possibly also for ideological reasons, that people can’t really be bothered to react as strongly as necessary,” Borg said during a Sunday conference call from Washington, DC.

Borg is in the US capital attending the spring meetings of the International Monetary Fund (IMF) and has had meetings with a number of economists and representatives from the IMF and the United States.

Sweden’s handling of its own banking crisis in the 1990s has received a great deal of attention recently as the world struggles to pull out of an ongoing financial crisis.

And according to Borg, neither the United States nor Britain have succeeded with the fundamental first step of acting taking control of ailing banks.

“One has to be ready to provide capital to banks in crisis. One can only recapitalize through ownership,” he said.

He believes that state-ownership of banks, which lie at the heart of the market economy, is a sensitive political issue.

But according to Borg, it’s not only an effective way to kick start the financial system, but also a good way to safeguard taxpayers’ money.

Borg suggests that the government should first take over financial institutions, supply them with fresh capital, and then return them to the market again.

He points out that that the Swedish state got back 95 percent of its outlays within five years in the 1990s.

The United States and Britain have been unclear in their cleaning up of bad assets and haven’t succeeded in guaranteeing bank loans very well, according to Borg.

“They’ve given out huge sums, but they’ve done it using different hybrids, like a cross between loans and shares and that’s never effective,” said Borg.

Borg also pointed out that together, the Nordic and Baltic countries are the world’s ninth largest economy, and in absolute terms, the same countries are the third largest donors to the World Bank, and one of the largest in the IMF.

Nevertheless, power in the global economy remains in G-20, claims Borg.

“It’s not right that we give so much money only to have decisions moved from the IMF to the G20, where we don’t have the same influence,” he said.