British Prime Minister Gordon Brown was yesterday to warn against withdrawing the massive stimulus measures launched to tackle the global credit crisis, saying it would be a “serious mistake.”
Brown was to urge G20 finance ministers meeting in London not to be too hasty to end the emergency measures that saw huge amounts of money pumped into economies after the credit crunch, as they seek a way out of the crisis.
The two-day gathering starting on Friday was to prepare the ground for a meeting of G20 leaders in Pittsburgh in the US on Sept. 24 and Sept. 25.
“To decide now that it is time to start withdrawing and reversing the exceptional measures we have taken would in my judgment be a serious mistake,” pre-released extracts of his speech said. “On the contrary, with more than half of the five trillion-dollar fiscal expansion committed to, yet to be spent, I believe the prudent course is for G20 countries to deliver fiscal plans and stimulus packages they have put in place and make sure they are implemented in full both this year and next.”
“Given the risks we face, this is not the time for economic complacency or over-confidence. The stakes are simply too high to get these judgments wrong,” he adds.
Brown’s cautious tone echoed that of Swedish finance minister Anders Borg, who said at the meeting on Friday that the world was still “standing in the ashes” of economic catastrophe.
“When you’ve just come out of the ashes, it’s not time to call off the fire department,” he added.
Meanwhile, major emerging economies Brazil, Russia, India and China told their G20 counterparts on Friday it was “too early” to speak of an end to the global economic crisis.
“We welcome the first signs that the global economy is beginning to improve and that the worst of the crisis may be behind us,” the so-called BRIC group said in a joint statement ahead of a full meeting of G20 finance ministers. “Despite these positive signs, it is too early to declare the end of the crisis. The global economy still faces great uncertainty, and significant risks remain to economic and financial stability.”
As the recession eases, the leading economies are expected to consider withdrawing the massive state packages of financial support pumped into the economy over the past year to try to unfreeze credit markets.
Brazilian Minister of Finance Guido Mantega said it was too early to talk of “exit strategies.”
“The economy this year is much better after one year of anti-cyclical policies, but despite their efficiency it is not the moment to talk of withdrawing them,” he said.
“The exit should be gradual,” he added, because clawing the fiscal stimulus back too quickly “would not send a good signal to the markets.”
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