LONDON (AFP) — Former US Federal Reserve chairman Alan Greenspan has warned that governments the world over may have to bail out more banks before the current financial crisis is over.
Writing in the Financial Times on Tiesday, Greenspan also warned of the "awesome cost" of a move towards protectionism by governments, arguing that globalisation was "at the root" of economic growth around the world over the past decade.
"Fears of insolvency have not, as yet, been fully set aside," Greenspan wrote.
"There may be numbers of banks and other financial institutions that, at the edge of defaulting, will end up being bailed out by governments."
British mortgage lender Northern Rock and American bank Bear Stearns both averted bankruptcy over the past year when they were given backing to varying degrees by their respective governments.
Greenspan also extolled the virtues of globalisation, describing it as having been "at the root of the past decade's unprecedented surge in world economic activity."
"The past decade has seen mounting global forces ... quietly displacing government control of economic affairs," he wrote.
He concluded: "The danger is that some governments, bedevilled by emerging inflationary forces, will endeavour to reassert their grip on economic affairs. If that becomes widespread, globalisation could reverse -- at awesome cost."
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