UK finance chief warns of double-dip recession risk

AFP , LONDON

Fri, Sep 04, 2009 - Page 10

The British chancellor of the exchequer said yesterday that international complacency risked plunging the world economy into a double-dip recession, in a stark message ahead of a G20 finance ministers’ meeting.

Chancellor Alistair Darling said governments must carry on spending to ensure the global economy returns to sustainable growth next year, after the worst financial crisis since the Great Depression.

“My view is that the biggest single risk to recovery is that people think the job is done,” Darling said in an interview with the Independent.

“There is a real risk that either governments or people generally think ‘We have done that, we are on the path to recovery,’” he told the newspaper.

Removing government stimulus packages is expected to be on the agenda when G20 finance ministers meet in London from today, ahead of the G20 leaders’ summit in Pittsburgh later this month.

With Japan, France and Germany officially out of recession, minds are turning to coordinating the withdrawal of packages and government bailouts for banks — although with caution.

British Prime Minister Gordon Brown warned this week that while the G20 largest economies must show willingness to work together on the removal of fiscal and monetary stimulus, it was too early to embark on exit strategies.

Ahead of the G20 meet, France is also leading calls for a coordinated crackdown on bankers’ bonuses, blamed for excessive risk-taking in the financial sector, including for a mandatory cap.

Darling said he was wary of anything that amounted to a “global pay policy” but saw “no problem” with the French plans to claw back bonuses after three or four years if they were not justified by performance.