World economic powers told Europe on Friday it would have to do more to fight its financial crisis before they agree to provide back-up in the form of a bigger IMF war-chest.
Finance ministers and central bankers from the G20 top economies are gathering in Mexico City with Europe hoping that China, Japan and others will soon commit to giving the IMF more money so it can help eurozone countries that suffer a cash crunch.
However, many G20 countries are insisting that Europe needs to take the first step by bolstering its own bailout funds.
“I expect no decision at the G20 summit on boosting the IMF’s resources,” said Jens Weidmann, head of Germany’s central bank and a European Central Bank (ECB) Governing Council member.
The host of the weekend’s meetings, Mexican Finance Minister Jose Antonio Meade, said it was “still early in the process” to discuss specific amounts and ways that G20 nations could commit more money.
The world’s rich countries have used the G20 to coordinate their response to the financial crisis that erupted in 2008 after the collapse of the US housing bubble and then spread to Europe, where many countries are saddled with heavy debts.
As the crisis has dragged on, divisions over how to tackle it have deepened. The IMF wants to raise as much as US$600 billion in extra resources to help deal with fallout from the eurozone debt crisis, but the plan faces resistance from countries including the US and Canada.
The US has told Europe to do more on its own and also made clear it would not provide more cash to help the IMF handle the crisis.
“What we don’t want to see is the IMF substitute — and it really cannot substitute — for a stronger European response,” US Treasury Secretary Timothy Geithner told CNBC TV.
Even if it wanted to, US President Barack Obama’s administration would have little or no chance of getting Congress’ approval in an election year to send more cash to help out Europe.
US reluctance has put the onus on Europe’s richest countries, plus China, Japan and others, to raise the funds.
EU leaders will meet next week to discuss boosting their own bailout funds. Even G20 countries that are willing to help are unlikely to promise more money until Europe proves it is acting to help itself.
“The problems many countries are facing today have a solution if they act decisively and in time,” Bank of Mexico Governor Agustin Carstens said. “If this is done sooner rather than later, we will see a promising future for the global economy.”
Despite the stand-off over timing, there was broad agreement within the G20 about the need to eventually increase the IMF’s firepower and that would likely be reflected in a communique at the end of the weekend’s meetings, diplomats said.
Germany has come under pressure, with critics saying it could do more to help its struggling European partners and that its insistence on fiscal belt-tightening risks plunging Greece even deeper into crisis.
Weidmann hit back on Friday, saying Germany was already financing a “disproportionately large share” of rescue efforts to date and that its insistence on budgetary discipline was aimed at ensuring a stable monetary union.
He said there was a popular misconception that Germany had managed to “dodge the flames of the current crisis ... [and] ... is now selfishly refusing to come to the aid of the stricken countries by acting as chief firefighter.”
Brown Brothers Harriman currency strategist Mark McCormick said the long-term answer to Europe’s problems would require further progress on a common approach to running national budgets.
“Money from the G20 via the IMF buys them a bit more time,” he said.
NOT ALL GOOD: Analysts warned that other data for last month might be less rosy due to the virus and analysts expect the PMI to contract again next month Chinese factory activity saw surprise growth last month as businesses went back to work following a lengthy shutdown, but analysts said that the economy faces a challenging recovery as external demand has been devastated by the COVID-19 pandemic, while the World Bank said that growth could screech to a halt. China is slowly returning to life after months of tough restrictions aimed at containing the virus, which put millions of people into virtual house arrest and brought economic activity to a near standstill. The strict measures saw a closely watched gauge of manufacturing plunge to its lowest level on record in February,
The output of the global smartphone industry this year is to contract by 7.8 percent on an annual basis as the COVID-19 pandemic ushers in a global recession, Taipei-based market researcher TrendForce Corp (集邦科技) said in a report on Monday. The global production of smartphones is expected to fall to 1.29 billion units, as the pandemic dampens demand for consumer electronics, leading to a decline in shipments across Europe and North America, TrendForce said. With consumers delaying smartphone purchases and thereby lengthening the device replacement cycle, overall prices would suffer a setback that is expected to negatively affect the profitability of smartphone
ELECTRONICS Lite-On delays sale of unit Lite-On Technology Corp (光寶科技) yesterday said it would postpone the sale of its solid-state drives (SSD) business to Kioxia Holdings Corp, formerly known as Toshiba Memory Holdings Corp, due to disruptions amid the COVID-19 pandemic. Last year, the Taiwan-based electronics components supplier struck the deal with the Japanese firm, agreeing to sell the unit for US$165 million. Citing unfinished integration work due to the pandemic, Lite-On has deferred today’s closing date until further notice, adding that the delay would not have a negative effect on the unit’s operations. AUTO PARTS Hiroca approves dividend Automotive interior parts supplier Hiroca
ALL ABOUT STRATEGY: The company is optimistic, saying that its gross margin should increase year-on-year, but it is scaling back on its plans to expand capacity Quang Viet Enterprise Co (QVE, 廣越), which makes down jackets and garments for sportswear and outdoor brands including Adidas AG, yesterday said that revenue might drop 5 to 10 percent annually this year as some customers trimmed orders in response to the COVID-19 pandemic. That would mark its first revenue decline since 2016. Quang Viet posted record-high revenue of NT$16.26 billion (US$537.45 million) last year, up 22 percent from 2018. Down jackets made up 40 percent of it revenue last year. North Face Inc and Patagonia Inc are this year likely to reduce orders by 20 to 30 percent from a