GENEVA (ILO News) – The International Monetary Fund Managing Director Dominique Strauss-Kahn called for increased cooperation between the IMF and the International Labour Organization (ILO), saying that coordination between multilateral institutions was crucial in addressing the global economic crisis.

“The IMF was established for a range of reasons, including the promotion of growth and employment around the world,” Mr. Strauss-Kahn said in remarks to a high-level meeting of the ILO’s Governing Body. “Having the input of the ILO – i.e. of workers and employers – is crucial for the IMF”.

Mr Strauss-Kahn also warned that “the current financial crisis must not become a wasteland of unemployment” and urged governments and international institutions to work closer together to address the immediate consequences of the economic downturn.

In his opening remarks, ILO Director General Juan Somavia described international coordination to tackle the crisis as weak, and said “the financial, trade, economic, employment and social roots of the global crisis are interlinked and so must be the policy responses”.

According to Mr Strauss-Kahn, the international economy could begin to recover as from 2010, but he stressed that it depended on certain conditions, “mainly that bold decisions are really implemented”.

He said the first step out of the crisis was to boost demand, and reiterated his call for a global fiscal stimulus of 2 percent of global GDP. He also said not all countries were in a position to apply a fiscal stimulus, as some of them have no fiscal room.

Mr Strauss-Kahn said the second step towards recovery was restoring the health of the financial sector. He said that in the 122 bank crises the IMF has seen in its lifetime, fixing the financial system was always a pre-requisite for resuming growth and creating employment.

“If we care about unemployment, we must renew the financial sector”, he said.

Finally, he said special attention must be given to emerging and low-income countries that have been heavily relying on foreign capital inflows and that have significant current account deficits.

“IMF support in this case is not enough. These countries need to rebuild their model and learn to live with less capital inflow. Financial help alone without a change of policy is not useful”, he said.

Mr Strauss-Kahn said that poor countries not only faced the risk of unemployment, but may also face rising social unrest, threats to democracy and even war. He spoke of “social conditionality” of IMF lending to protect spending for the most vulnerable.

The high-level meeting also heard remarks by Mr. Guy Ryder, General Secretary of the International Trade Union Confederation (ITUC) who said government measures to address the crisis should maximize employment-generation and extend social protection. He also called for more regulation of global financial markets and combating the risk of wage deflation.

Speaking on behalf of the employers, the President of the Russian Union of Industrialists and Entrepreneurs, Mr. Alexander Shokhin, said one of the priorities was to make sure the players of the real economy had access to credit. He also said it was “very important to maintain budgetary expenditure on certain infrastructure projects which would create employment and reduce unemployment”.

Also present at the meeting was Mr. Jonathan Shaw, Minister for Disabled People and Minister for the South East, from the UK Department for Work and Pensions, who said the ILO had “a key role to play in mitigating the effects of the crisis on the real economy and developing policies to promote a recovery based on long term sustainable and job rich growth”.