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G8 ministers preparing for economic recovery
Source: Agencies |
June 14, 2009, Sunday
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Print Edition
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THE Group of Eight industrialized nations have begun preparing for an economic recovery, acknowledging yesterday "signs of stabilization in our economies" and agreeing to ask the International Monetary Fund to study ways to unwind hefty stimulus packages.
In a communique released at the end of a two-day meeting in Lecce, Italy, the group's finance officials said that although the global economy was still weak, so-called exit strategies from monetary and fiscal stimulus measures -- like tax cuts and lower interest rates -- were "essential to promote a sustainable recovery over the long term."
The ministers said they had asked the IMF to analyze potential strategies to assist with the process.
However, ministers from the United States, Japan, Germany, France, Britain, Italy, Canada, Russia and the European Union added that the "situation remains uncertain and significant risks remain to economic and financial stability" and stressed their commitment to provide any more stimulus the economy might need.
"These early signs of improvement are encouraging, but the global economy is still operating well below potential and we still face acute challenges," US Treasury Secretary Timothy Geithner said after the meeting.
The talks were designed to set an agenda for a meeting of G8 heads of state next month in L'Aquila in central Italy.
Financial markets have rallied over the past three months on better-than-expected economic data, but there are worries in the US and Britain that continental Europe has not done enough to deal with the recession. And the World Bank forecast on Thursday that the global economy would contract 3 percent this year, far worse than a previous estimate of minus 1.75 percent.
British Treasury Chief Alistair Darling downplayed the urgency of exit strategies in the current economic climate, noting that some countries were only just beginning the process of sorting out problems in the banking sector.
"One thing we are absolutely clear about is we are not there yet," Darling said. "No one's talking about exiting now, this is some way down the track."
Germany has been a particularly strong critic of the lower interest rates, tax cuts and measures to boost the money supply employed by countries including Britain and the US, saying they were potentially inflationary and deficit-building.
Geithner said measures to repair the credit markets and the financial system "are designed to be temporary and quickly reversible."
Italian Finance Minister Giulio Tremonti said exit strategies were fundamental to creating a climate of trust and there was a general consensus they were needed, but he said designing a program would require compromises among the G8 bloc.
The communique also spelled out the need for a set of common principles and standards for propriety, integrity and transparency in international business and finance.
They agreed on the objectives of a strategy, dubbed the Lecce Framework, to identify and fill regulatory gaps and foster the international consensus needed to rapidly implement new rules.
In a communique released at the end of a two-day meeting in Lecce, Italy, the group's finance officials said that although the global economy was still weak, so-called exit strategies from monetary and fiscal stimulus measures -- like tax cuts and lower interest rates -- were "essential to promote a sustainable recovery over the long term."
The ministers said they had asked the IMF to analyze potential strategies to assist with the process.
However, ministers from the United States, Japan, Germany, France, Britain, Italy, Canada, Russia and the European Union added that the "situation remains uncertain and significant risks remain to economic and financial stability" and stressed their commitment to provide any more stimulus the economy might need.
"These early signs of improvement are encouraging, but the global economy is still operating well below potential and we still face acute challenges," US Treasury Secretary Timothy Geithner said after the meeting.
The talks were designed to set an agenda for a meeting of G8 heads of state next month in L'Aquila in central Italy.
Financial markets have rallied over the past three months on better-than-expected economic data, but there are worries in the US and Britain that continental Europe has not done enough to deal with the recession. And the World Bank forecast on Thursday that the global economy would contract 3 percent this year, far worse than a previous estimate of minus 1.75 percent.
British Treasury Chief Alistair Darling downplayed the urgency of exit strategies in the current economic climate, noting that some countries were only just beginning the process of sorting out problems in the banking sector.
"One thing we are absolutely clear about is we are not there yet," Darling said. "No one's talking about exiting now, this is some way down the track."
Germany has been a particularly strong critic of the lower interest rates, tax cuts and measures to boost the money supply employed by countries including Britain and the US, saying they were potentially inflationary and deficit-building.
Geithner said measures to repair the credit markets and the financial system "are designed to be temporary and quickly reversible."
Italian Finance Minister Giulio Tremonti said exit strategies were fundamental to creating a climate of trust and there was a general consensus they were needed, but he said designing a program would require compromises among the G8 bloc.
The communique also spelled out the need for a set of common principles and standards for propriety, integrity and transparency in international business and finance.
They agreed on the objectives of a strategy, dubbed the Lecce Framework, to identify and fill regulatory gaps and foster the international consensus needed to rapidly implement new rules.
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