If European leaders can't hammer out a solution to the continent's runaway credit crisis, the world's economy will face a collapse larger than the one in 2008, a prominent IMF advisor says.
"If they can not address this in a credible way I believe within perhaps two to three weeks we will have a meltdown in sovereign debt which will produce a meltdown across the European banking system," Robert Shapiro, chairms of financial consultancy Sonecon, told BBC News on Thursday in a video first flagged by Zero Hedge.
Shapiro's comments come as the governor of the Bank of England declared that the world may be in the midst of the worst financial crisis in history, and billionaire investor George Soros compared the developed world's economies to that of the Soviet Union before its collapse -- a string of negativity that reflects an increasingly dire global economic situation.
"We're not just talking about a relatively small Belgian bank, we are talking about the largest banks in the world," Shapiro told the BBC, "the largest banks in Germany, the largest banks in France, that will spread to the United Kingdom in part through sovereign debt problems in Ireland, it will spread everywhere because the global financial system is so interconnected. All those banks are counterparties to every significant bank in the United States, and in Britain, and in Japan, and around the world."
He added: "This would be a crisis that would be in my view more serious than the crisis in 2008."
Shapiro's comments came the same day Bank of England Governor Mervyn King announced he would be printing an additional GBP75 billion to stimulate economic growth.
Justifying the new round of quantitative easing, as it is known, the governor told the Daily Telegraph, “This is the most serious financial crisis we’ve seen, at least since the 1930s, if not ever. We’re having to deal with very unusual circumstances, but to act calmly to this and to do the right thing.”
Meanwhile, billionaire investor George Soros focused in on what he sees as dysfunction within the Western economic infrastructure.
In an interview with Bloomberg, Soros said the chaos in financial markets since 2008 reminded him of the Soviet Union before its collapse.
“Something similar is happening in the West,” Soros said, as quoted at Bloomberg. “You had a financial crisis where the market did actually collapse, but it was kept alive by the authorities. People don’t realize that the system has actually collapsed.”
Asked about a possible solution to the crisis, Soros responded: “That is not so easy. ... There is a lot of confusion, and I am also confused.”