Goldman Sachs Asset Management Chairman Jim O’Neill said the world’s financial system risks repeating the crisis of 2008 if the European sovereign debt crisis escalates and spreads to the U.S. banking industry and cuts lending to businesses.

“This is where the parallels with 2008 are relevant, even though I think they are being over exaggerated,” O’Neill said in an interview on CNBC today. “It was when the financial system really imploded that financial firms stopped extending credit to anybody that the corporate world had to destock and we know what happened after that. We are not far off the same sort of thing.”

“As the problem in Europe spreads from Greece to more and more other countries and in particular Italy, the exposure that so many people bank-wise have to Italian debt means that the systems can’t cope easily with that and it would spread way beyond Europe’s borders,” O’Neill said. “This is why the policy makers need to stop being so sleepy and get on and lead.”