The Wall Street Journal: Local Showdown with the Global Downturn – Two Patterns of Dealing with “Toxic Assets” Emerge: Developed Economies Assimilate while Emerging Markets Use Targeted Mitigation Policies

Mirtchev, A. (2009, January 11). Local Showdown with the Global Downturn – Two Patterns of Dealing with “Toxic Assets” Emerge: Developed Economies Assimilate while Emerging Markets Use Targeted Mitigation PoliciesThe Wall Street Journal. 

wsj-wallstreetjournal-convertedDr. Mirtchev considers that some of the rapidly developing and emerging market economies are better-positioned than even some of the major economies to deal with the pressures of the global credit crunch and economic downturn.  Emerging markets are not “decoupled” from the rest of the world; they face the same pressures, and, provided they introduce some specific policies in response to the crisis, could very well be better positioned to address the continued “toxicity” of certain assets. Although not without losses, “toxic” balance sheets in certain emerging markets can be revitalized relatively painlessly. However, Mirtchev warns that those economies that succumb to the pressure and try to transfer bad or “toxic” assets onto state balances face the potential of further debt constraints and the accompanying deterioration of financing terms for both the public and private sector.  This, in turn, could impair their increasing global competitiveness and geopolitical influence.