World finance leaders are set to say on Friday that the world's economy is recovering from the credit crisis but the pace of recovery is uneven among countries, a G20 source said.A draft communique for a meeting of G20 finance ministers and central bank governors will also refer to a new mechanism for balancing growth in the global economy although it will not refer to country-specific measures, the source said.
Friday April 23, 2010
Finance officials see improving global economy following deep recession, but threats remain
WASHINGTON (AP) -- Finance officials from major countries believe the global economy is in far better shape than a year ago, but they are wrestling with a growing debt crisis in Greece that could unravel the hard-won gains.
The International Monetary Fund issued a statement Friday stressing that the 186-nation lending agency was prepared to process Greece's request for emergency loans quickly.
Greece's call for help came as finance ministers and the heads of central banks from the Group of 20 major economies gathered at IMF headquarters for daylong talks. The G-20 is composed of the world's richest industrial countries and fast-growing developing nations such as China, Brazil, South Korea and Russia.
The United States was being represented by Treasury Secretary Tim Geithner and Federal Reserve Chairman Ben Bernanke. The talks Friday were in advance of weekend meetings of key policymaking boards of the 186-nation IMF and its sister lending institution, the World Bank.
All the discussions were likely to be overshadowed by Greece's debt problems, which have roiled global financial markets for weeks.
Greek Prime Minister George Papandreou on Friday called for the activation of a joint eurozone-IMF financial rescue for his debt-ridden country.
In response, IMF Managing Director Dominique Strauss-Kahn issued a statement saying his organization was ready "to move expeditiously" on Greece's request. Strauss-Kahn had already been scheduled to meet with Greek Finance Minister George Papaconstantinou on Saturday. IMF officials said emergency talks between an IMF team that arrived in Athens at the beginning of the week and the Greek government were continuing.
"It's clear that the Greek situation is a very serious one," Strauss-Kahn told reporters Thursday. "There is no single way, no silver bullet to solve it in an easy manner."
French Finance Minister Christine Lagarde, speaking to a Washington think-tank late Thursday, said she was confident Greece would be able to successfully implement an austerity program full of "very hard and harsh measures" being demanded by the other governments as a condition for support.
The Obama administration is hoping the G-20 will endorse a set of financial reforms that will complement the sweeping overhaul that President Barack Obama is seeking to get approved in Congress. That measure was scheduled for an initial showdown vote in the Senate on Monday.
The administration believes the United States, the world's largest economy, must show resolve in fixing the flaws exposed by the financial crisis or the momentum for global reform could falter. However, the G-20 nations were finding it tough to reach a consensus in a number of key areas, including a call by the IMF to boost taxes on financial institutions to pay for future bailouts.
Canadian Finance Minister Jim Flaherty said Thursday, "I'm not going to impose a tax on our banks that performed well during the crisis."
In addition to overhauling rules governing banks' capital and liquidity standards and the regulation of exotic financial instruments such as derivatives, the finance officials were also scheduled to discuss efforts to assemble the IMF support package for Greece.
The G-20 talks were being held at a time when the global economy is showing signs of improvement. The IMF released a new outlook for the meetings that forecast growth this year of 4.2 percent, significantly better than the 0.6 percent drop in activity last year, the biggest plunge in the post-World War II period.
Strauss-Kahn, however, cautioned that the recovery was still "fragile," with wide discrepancies between different regions. China, now the world's third-largest economy, and other emerging Asian economic powers are surging ahead, followed by more moderate growth projected for this year in the United States and sluggish growth expected in much of Europe.
The Group of 24, composed of finance officials from developing nations in Africa, Latin America and Asia, issued its own communique Thursday, calling on the rich nations to avoid erecting protectionist trade barriers to deal with the economic slump.
The G-20 leaders will meet again in June in Toronto. The discussions among the finance officials were designed to make progress on the financial reform plan that will be presented to the leaders.
The finance officials were also debating ways to meet another goal set by leaders of pursuing more balanced global growth. Countries such as the United States are expected to show how they plan to narrow their trade and budget deficits while surplus countries such as China were expected to present plans for boosting domestic growth and relying less on exports.
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