Economies are divided over dollars reduction
Print Edition
Emerging and developed G20 powers struggled to find common ground over the turmoil unleashed by the prospect of the United States reducing a flood of dollars to the world economy.
The G20, which took the lead in responding to economic crisis in 2009, is now at odds as the US recovery gains pace, Europe lags and developing economies face the looming “taper” of US monetary stimulus.
“Our main task is returning the global economy toward steady and balanced growth. This task has unfortunately not been resolved,” Russian President Vladimir Putin said in St Petersburg.
Ben Bernanke, chairman of the US Federal Reserve, triggered a selloff in emerging market currencies, stocks and bonds and a flight to the dollar when, in May, he raised the possibility of reducing the Fed’s US$85 billion a month bond-buying program. The Fed is expected to take a first step to reduce the extraordinary monetary stimulus this month.
Advanced economies will drive global growth while emerging countries are at risk of slowing due to tighter US monetary policy, the International Monetary Fund warned in a pre-summit briefing paper.
China urged Washington to be “mindful of the spillover effects and work to contribute to the stability of the global financial markets and the steady recovery of the global economy.”
Chinese Vice Finance Minister Zhu Guangyao pressed Europe to do more to revive economic growth, which has started to pick up after a sovereign debt crisis in some eurozone countries. “The structural problems are far from solved and now is no time to be arrogant,” Zhu told reporters.
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