TOKYO -- The world could be plunged back into financial chaos on par with the subprime crisis if the corporate debt bomb explodes, Jacques Attali, a French economist and former president of the European Bank for Reconstruction and Development, told the Nikkei Asian Review on Thursday.
Attali was in Tokyo to attend a forum held by Works Applications, a major Japanese software developer.
He said because of the quantitative easing programs by central banks around the world, companies that normally would not have been able to access loans have been building up debt. Attali warned that when the U.S. Federal Reserve Bank raises its interest rate, the debt balloon may burst.
"Remember that the crisis on subprimes began when there was an incident in France, when someone realized it was impossible to pay back. Something of that kind will happen with corporate bonds somewhere in the world, and that will be the end of the balloon," he said. "It will have a terrible impact on the world economy. Terrible because in 2008, there was no public debt and it was possible to soften the crisis by increasing the public debt. [That is] not possible today."
Attali said the impending risk of a financial crisis contributes to his belief that "we are not far from World War III."
"The development of protectionism, the risk of financial crisis, leads people to find military solutions. Protectionism always leads to war. In Asia, there is a risk of war between China and Japan, and there was an incident between the American army and the Chinese army [in the South China Sea], and that can trigger a world war by the effect of alliances," he said.
One way to avert such a scenario, according to Attali, is to promote financial cooperation. "[The agreement on] the Trans-Pacific Partnership is good news. It will have a huge impact on integration between the Asian countries and integration of the Pacific Rim," he said. "But I think it is a must to include China, because if not, they are going to be very hostile. The TPP could be seen by the Chinese as a mechanism to isolate them. Very dangerous."
But Attali played down the significance of the refugee crisis in his home country and other parts of Europe. "Don't forget that Europe has 500 million inhabitants. Even if we receive 5 million [refugees], it is 1% of our population. It's peanuts," he said. "It is a media issue, but it is not a problem."