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Former Citi executive offers sage advice for Europe

William (Bill) Rhodes, left, clasps hands with South Korean finance minister Lee Kyu-sung, centre, and chairman of the Korea Exchange Bank Hong Se-pyo in a show of unity after a signing ceremony for debt extension in Seoul, March 31, 1998.

Paul Barker/Reuters/Paul Barker/Reuters

During his career as a senior executive at Citigroup, William (Bill) Rhodes smoked Cohibas with Fidel Castro and had a fateful three-hour dinner with Rupert Murdoch that led to a debt restructuring for News Corp. Mr. Rhodes is an old hand at forcing banks, politicians and corporations to deal with messy debt loads. He headed the advisory committees of international banks that negotiated debt-restructuring agreements for Argentina, Brazil, Jamaica, Mexico, Peru and Uruguay in the 1980s and 1990s. He's been to China more than 60 times.

Now a retired adviser whose Rolodex contains a Who's Who of the world's business and political establishment, Mr. Rhodes has penned a book called Banker to the World: Leadership Lessons from the Front Lines of Global Finance. The forward is written by former U.S. Fed chairman Paul Volcker, Henry Kissinger calls the book required financial reading, and economist Nouriel Roubini credits Mr. Rhodes with being one of the few who predicted what we are now calling the Great Recession.

In an interview, Mr. Rhodes said believes Europe is now repeating mistakes of the past because the leaders there refuse to learn from experiences in Latin America and other parts of the developing world.

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The key lessons he thinks that Europe hasn't taken in are:

1. Lead boldly and decisively

Harkening back to situations that he was involved in Turkey, Brazil and South Korea, Mr. Rhodes said he's found that debt-restructuring situations only work with strong leadership.

"They were able to sell these programs, all three of them," he said. "They were able to get across that these were programs that were worked on and designed by the country itself to get it out of the problems that it was in. So they were able to mobilize the support of the population.

"What we've been missing so far in Europe is leadership to take the necessary decisions, but also the ability to sell programs to the populations. This is the problem that you've got in Greece, because the population hasn't been convinced. The government has not been able to convince the people that this is in their own interest.

"I mentioned this actually to [then-prime minister George]Papandreou on several occasions in 2010 when I talked to him, and referred to the example of Turkey because he knew the situation well. I said unless he was able to convince the Greek population that it was in their interest to take these measures, he wasn't going to get the support and the implementation that he needed. That's where you get leadership."

2. Execute in a timely fashion

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In 1992 when Mr. Rhodes was chairing a group of 13 international banks and the Argentine government trying to finalize a $31-billion (U.S.) Brady bond deal, he decided to get action by rounding up key people attending an Inter-American Development Bank meeting in Santo Domingo, putting them in a small hot hotel room, and forcing negotiations that went around the clock for two nights until the deal was done.

"I tried to tell the European leadership – political, Brussels, the ECB, the banking community – I put it out to them that timing is of the essence, because the longer you take to resolve these crises, to take the proper measures, the worse they get and the more difficult they get to be able to handle. And, of course, this leads to contagion."

Mr. Rhodes also believes that the International Monetary Fund needs to be re-established as an anchor in the financial system, rather than being just one part of the so-called troika (along with the European Union and European Central Bank) that is working to solve the problems in Greece.

"The only way you're going to get the Chinese to be helping here is if an independent fund does it, managed by the IMF," he said.

And, like many experts, he believes that Europe needs to move toward greater fiscal integration.

"This, although a tremendous crisis for Europe and the world, presents itself I think as an opportunity to finally get the fiscal side in order, working with the monetary side in Europe. That's got to be worked on very rapidly."

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