WASHINGTON ó International financial officials called Saturday for collective, decisive action to bring the global economy out of its current dangerous phase both in Europe and worldwide.|By Anne Walters
WASHINGTON ó International financial officials called Saturday for collective, decisive action to bring the global economy out of its current dangerous phase both in Europe and worldwide.
“Today we agreed to act decisively to tackle the dangers confronting the global economy,” the International Monetary Fund’s International Monetary and Financial Committee said in a communique after meeting Saturday.
“Our circumstances vary, but our economies and financial systems are closely interlinked. We will therefore act collectively to restore confidence and financial stability, and rekindle global growth.”
The policy committee acknowledged that advanced economies are at the heart of the current problems and that they must focus on bringing government finances into order but also promoting economic growth.
“Euro-area countries will do whatever is necessary to resolve the euro-area sovereign debt crisis and ensure the financial stability of the euro area as a whole and its member states,” the committee said.
Such measures include implementing an agreement reached on July 21 to expand the eurozone bailout facility’s mandate.
“What was very clear is that we know that no one is going to be immune from problems in any one part of the world, and problems in the euro area in particular are problems that will affect all of us,” said IMFC Chair Tharman Shanmugaratnam. “It is not a decoupled world.”
He said there was also a willingness by those outside the eurozone to have the IMF play a role in resolving the crisis.
Worries that Greece’s debt problems could spill over have weighed heavily on international markets for months and dominated talks at this past week’s IMF meetings.
Earlier Saturday, U.S. Treasury Secretary Timothy Geithner demanded that the eurozone make greater efforts to fight the crisis.
He said in an address to the IMF that “impressive” measures have been taken during the past 18 months, but added that more is necessary to “create a firewall against further contagion.”
He demanded that European governments work together with the European Central Bank to demonstrate with “unequivocal commitment” that states with sound fiscal policies have access to affordable financing, and to ensure that banks have access to adequate capital, “to win the full confidence of their depositors and creditors.”
“The threat of cascading default, bank runs and catastrophic risk must be taken off the table, as otherwise it will undermine all other efforts, both within Europe and globally,” Geithner told the IMF steering committee.
But Geithner’s recent suggestions that the eurozone bailout fund be leveraged to expand its resources, much like the joint effort by the U.S. Treasury Department and Federal Reserve during the 2008 financial crisis in the United States, have faced opposition from Germany, the European Union’s largest economy.
German Finance Minister Wolfgant Schaeuble and Bundesbank President Jens Weidmann reject such demands to bolster the financial punch of the EFSF using credit leveraged through the European Central Bank. There are other alternatives, Schaeuble has said.
Brazilian Finance Minister Guido Mantega warned the U.S. and the eurozone of severe economic consequences if they did not do enough to tackle their problems.
In the absence of “a strong response from policy-makers, the best scenario for these countries seems to be prolonged stagnation with high unemployment,” Mantega told the IMF steering committee.
He compared the current situation to 2008, when the collapse of Lehman Brothers sent the global economy into a tailspin.
Brazil shares the opinion of the IMF that fiscal policy stimulus packages, combined with long-term spending cuts, could reduce the risk of recession, he added.
IMF Managing Director Christine Lagarde stressed the focus must now be on implementing existing commitments to address the problems.
“It is clearly important that commitments that have been made be delivered upon,” she told reporters. “It’s implementation first and foremost. No qualification.”
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©2011 Deutsche Presse-Agentur GmbH (Hamburg, Germany)|
