Lower interest rates and fiscal stimulus measures in the US and Europe have put global growth on track for recovery this year, though deflation and a banking crisis in Japan mean risks remain, policy makers said.
"The doomsday scenario never materialized" after the Sept. 11 terrorist attacks, International Monetary Fund Managing Director Horst Koehler told a panel at the World Economic Forum.
"This has something to do with a coordinated effort by the US and Europe."
The US economy, the world's largest, entered recession last March. Growth slowed or stopped in most other countries, crimping profits and share prices around the world. That prompted central banks across the world to trim borrowing costs and governments to offer fiscal stimulus.
In the US, the Federal Reserve cut interest rates eleven times last year, to a four-decade low of 1.75 percent, and the government mailed out advance tax refunds worth US$38 billion.
Across the Atlantic, the European Central Bank lowered the cost of money in the dozen countries that share the euro four times, the Bank of England cut rates seven times, and governments offered various stimulus measures.
European officials have been criticized for not matching the US administration's effort in sustaining global expansion.
Stalling growth has sapped tax revenue, making it hard to increase public spending without breaching the EU's growth and stability pact that requires member states to keep the budget deficit below three percent of gross domestic product.
Nevertheless, the French government offered 1.07 billion euros (US$860 million) in tax rebates in September and January for low-income workers.
Following the Sept. 11 terrorist attacks in the US, European governments ruled out direct aid to companies, though they promised airlines insurance guarantees.
"In Europe, we have taken action which by its size can be compared to US action," said Laurent Fabius, France's finance minister. As a result "recovery will be synchronized," he said.
There are suggestions of a rebound. After shrinking at an annual rate of 1.3 percent in the third quarter, the US economy unexpectedly grew 0.2 percent in the final three months last year.
"There are indications the US is picking up," said World Trade Organization Director-General Mike Moore.
On the other side of the Atlantic, French, German and Italian business confidence is rising.
"The signs are mixed, but they always are at the start of a recovery," Canadian Finance Minister Paul Martin said in an interview.
"The expectation is for a rebound in the second half of the year."
The wildcard remains Japan, policymakers said. The world's second-largest economy is mired in its third recession in a decade, prices fell last year at the fastest pace in 30 years, and national debt is expected to reach 140 percent of gross domestic product by March of next year.
Its banking sector is also crippled by ?151 trillion of non-performing loans.
"If Japan does not grow more rapidly in the future, it would not be good for the world economy," said Kenneth Dam, US deputy Treasury secretary. Its government should address the bad loan problem and also restructure its industrial base as "for every bad loan, there is a bad asset," he said The US official expressed confidence that Prime Minister Junichiro Koizumi would push ahead with reform. A ?2.5 trillion plan to build more roads and homes, the second such package in two months, will now go to full session of the upper house after being approved by its budget committee yesterday and the more-powerful lower house on Tuesday.
Fiscal Policy Minister Heizo Takenaka cited the successful passage of the plan as proof the Japanese were trying to boost growth. The public had now embraced the need for structural changes and lawmakers were pursuing an end to deflation within two years, he said.
"We see some kind of a risk of a deflation spiral, so we now take a very defensive type of policy," he said. "I am confident we do not have a deflationary spiral, but at the same time we do not have a good answer to stop deflation." He disputed allegations that his government was pursuing a weaker yen in an effort to spark growth through higher exports.
"The Bank of Japan has been easing monetary policy so it's quite normal to see the nominal exchange rate going down," he said.
"At this moment, the exchange rate change is contributing to some extend to the export sector, but this effect is not very large." Around 3,000 business, government, social, and religious leaders are in New York for five days of seminars, speeches, parties and dinners in and around the 189-year old landmark Waldorf Astoria Hotel.
Seventy percent of middle and elementary schools now conduct English classes entirely in English, the Ministry of Education said, as it encourages schools nationwide to adopt this practice Minister of Education (MOE) Cheng Ying-yao (鄭英耀) is scheduled to present a report on the government’s bilingual education policy to the Legislative Yuan’s Education and Culture Committee today. The report would outline strategies aimed at expanding access to education, reducing regional disparities and improving talent cultivation. Implementation of bilingual education policies has varied across local governments, occasionally drawing public criticism. For example, some schools have required teachers of non-English subjects to pass English proficiency
‘FORM OF PROTEST’: The German Institute Taipei said it was ‘shocked’ to see Nazi symbolism used in connection with political aims as it condemned the incident Sung Chien-liang (宋建樑), who led efforts to recall Democratic Progressive Party (DPP) Legislator Lee Kun-cheng (李坤城), was released on bail of NT$80,000 yesterday amid an outcry over a Nazi armband he wore to questioning the night before. Sung arrived at the New Taipei City District Prosecutors’ Office for questioning in a recall petition forgery case on Tuesday night wearing a red armband bearing a swastika, carrying a copy of Adolf Hitler’s Mein Kampf and giving a Nazi salute. Sung left the building at 1:15am without the armband and apparently covering the book with a coat. This is a serious international scandal and Chinese
PERSONAL DATA: The implicated KMT members allegedly compiled their petitions by copying names from party lists without the consent of the people concerned Judicial authorities searched six locations yesterday and questioned six people, including one elderly Chinese Nationalist Party (KMT) member and five KMT Youth League associates, about alleged signature forgery and fraud relating to their recall efforts against two Democratic Progressive Party (DPP) legislators. After launching a probe into alleged signature forgery and related fraud in the KMT’s recall effort, prosecutors received a number of complaints, including about one petition that had 1,748 signatures of voters whose family members said they had already passed away, and also voters who said they did not approve the use of their name, Taipei Deputy Chief Prosecutor
TRADE: The premier pledged safeguards on ‘Made in Taiwan’ labeling, anti-dumping measures and stricter export controls to strengthen its position in trade talks Products labeled “made in Taiwan” must be genuinely made in Taiwan, Premier Cho Jung-tai (卓榮泰) said yesterday, vowing to enforce strict safeguards against “origin laundering” and initiate anti-dumping investigations to prevent China dumping its products in Taiwan. Cho made the remarks in a discussion session with representatives from industries in Kaohsiung. In response to the US government’s recent announcement of “reciprocal” tariffs on its trading partners, President William Lai (賴清德) and Cho last week began a series of consultations with industry leaders nationwide to gather feedback and address concerns. Taiwanese and US officials held a videoconference on Friday evening to discuss the
RSS