Finance ministers from the world’s largest economies on Friday said they are determined to prevent a slide into another global recession, but a top US official expressed frustration that a number of major economies were not doing enough to increase growth.
After two days of discussions, finance officials from the G20 unveiled plans for a global initiative to build roads and other infrastructure projects to help boost world growth by US$2 trillion over the next five years and create millions of jobs.
However, officials conceded that this longer-run effort would not help with the pressing problems of weak growth in Europe and a number of other parts of the world.
In addition, US Treasury Secretary Jack Lew said governments in Europe, Japan and China were failing to deliver needed support.
“European leaders should focus on recalibrating policies to address persistent demand weaknesses,” Lew said in comments prepared for a session of the policy-setting committee of the IMF.
Weak reports on industrial production and trade out of Germany, Europe’s largest economy, jolted financial markets and raised worries that Europe could be headed for another recession.
US stocks endured their worst week since May 2012, with the losses continuing on Friday when the Dow Jones industrial average slid 115 points.
It was against this backdrop that G20 finance ministers and central bank presidents met for talks that ended Friday in advance of the annual meetings of the 188-nation IMF and its sister lending institution, the World Bank.
Lew did not mention Germany by name, but it was clear that his remarks on Europe focused on that nation’s reluctance to do more to stimulate growth.
“Countries with external surpluses and fiscal flexibility” needed to increase their efforts to promote stronger growth — Germany ran a large trade surplus last year,” he said.
Lew said economic risks in China had risen and that it had ample resources to adjust its policies to support domestic-led growth.
He described Japan’s prospects as uncertain, “with growth projected to remain weak this year and next,” and said Japanese officials needed to move “decisively” to implement needed structural reforms in its economy.
Speaking at a news conference, Japanese Minister of Finance Taro Aso said his economy, the world’s third-largest, was not weakening even though growth had slowed in the April-to-June quarter.
“We are still on the track to recovery” and the nation is starting to emerge from its prolonged period of deflation, he said.
Chinese Vice Minister of Finance Zhu Guangyao (朱光耀) on Friday said that China is watching its property market closely, but sees no need for any big stimulus for the sector or the rest of the economy.
Zhu said in Washington that the government considered the current economic situation in China, including the real-estate market, was “still stable.”
“There’s no [need] for a big stimulus program. We must let the market play its role,” he said.
While developing the five-year plan for infrastructure projects, the G20 finance officials this time were less successful in their efforts to deal with the immediate threats from the slowdowns in Europe, Latin America and China.
The group did not issue a communique, but individual finance ministers said the economic problems were discussed in the sessions.
“We as a group do not want to settle for mediocre growth,” Canadian Minister of Finance Joe Oliver told reporters after the G20 discussions which ended on Friday. “We don’t think we have to.”
IMF managing director Christine Lagarde said that while the problems facing the global economy were well known, “action in the past has lacked.
This time, the challenge is for real. We must aim higher, try harder and work better together to achieve higher growth outcomes.”
The finance officials also addressed a growing health crisis in the Ebola virus outbreak, while both the policy-setting committees of the bank and the IMF were expected to address the Ebola crisis at their meetings on Saturday.
Additional reporting by Reuters
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