Sat, Apr 20, 2013 - Page 15 News List

Weak global economy tops meet list

NOT ON TRACK:The G24 voiced concern at the IMF and World Bank’s spring meetings that the world still is not over the financial crisis, which affects emerging countries


IMF managing director Christine Lagarde speaks during her opening news conference at the start of the IMF and World Bank’s spring meetings in Washington on Thursday.

Photo: Reuters

Advanced and developing countries alike voiced worries over fragile global growth, eurozone stagnation and the swamp of excess monetary liquidity as the IMF and World Bank’s annual spring meetings started on Thursday.

Calls continued from multiple fronts for countries to ease harsh austerity programs to boost growth and, at the same time, for the world’s central bankers to be more cautious about feeding more money into the financial system, lest it spark new investment bubbles and an inflation outbreak.

IMF managing director Christine Lagarde expressed fresh concern over the “three-speed recovery” in the world’s largest economies — stagnating Europe and Japan, the sluggish US, and quicker-moving emerging economies.

That the three groups of countries are moving at distinctly different speeds “is not the healthiest recovery that we could think of,” she said. “What we need is a full-speed global economy.”

The IMF meetings opened amid stress and frustration that, as the large economies still have not fully returned to growth after the 2008 financial crisis, small economies remained vulnerable to the continued turbulence.

Finger-pointing about excessive austerity and lack of support for demand, unmanageable capital flows stoked by central banks pumping out money, competitive devaluations, excessive sovereign debt and papered-over banking weaknesses were all in the open ahead of the meetings.

More than four years after the financial crisis battered the globe, “we’re still in the process of getting out of the crisis,” said Mexican Minister of Finance Luis Videgaray Caso, chairman of the G24 emerging and developing countries.

The G24 especially voiced concern about “the negative spillover effects on the emerging and developing countries of prolonged unconventional monetary policies.”

The G24 issued a joint communique on the sidelines of the IMF-World Bank meetings, urging the fund and the bank to step up efforts to achieve more coordinated global economic policymaking.

Still, Lagarde urged more stimulus for the short term, telling journalists that countries like Spain and the US could do well to pull back slightly from immediate efforts to shrink their budget deficits, and that the European Central Bank has room to cut interest rates to spur growth.

French Minister of Finance Pierre Moscovici said that sentiment to pull back from austerity in Europe was growing.

“Everyone understands now that adding austerity on top of recession would be a serious mistake,” he said.

Little concrete action on the big issues was expected from the IMF and World Bank sessions.

On the sidelines of the meetings on Thursday and yesterday, the finance ministers and central bankers of the G20 advanced economies were meeting on some key issues, including advancing efforts to rein in tax evasion and boost banking transparency around the world.

The G20 is expected to weigh endorsing a global effort to force banks to automatically share information with countries seeking to tax their nationals holding secret offshore accounts — an effort that could deal a blow to tax havens like the Cayman Islands, Hong Kong, Switzerland and others.

It remained unclear how far the G20 will go. At least the US and France are said to be hoping for a strong endorsement.

“A door toward the end of banking secrecy is open. It is something extremely important,” Moscovici said.

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