US President Barack Obama urged fellow leaders yesterday to agree swift action at next month’s G20 summit to spur global recovery.
His call came one day after Washington unveiled a plan to soak up toxic assets plaguing credit markets.
In an article for German newspaper Die Welt, Obama called for an agreement on stimulus measures at the April 2 meeting in London which he said could revive economic growth.
“First, we must take quick measures to stimulate growth,” Obama wrote, according to the German translation of his comments.
The US and Europe have been at odds over whether more spending was needed on top of what governments have already adopted, with many Europeans arguing the stress should now shift to strengthening market regulation.
But Obama suggested it was too early to close the taps with public funds.
“If the London summit contributes towards immediately initiating joint measures, we can smooth the path for a secure recovery and prevent future crises,” he wrote.
US Treasury Secretary Timothy Geithner on Monday detailed a raft of incentives for private investors to buy up to as much as US$1 trillion of troubled assets that have strangled global debt markets and pushed the world economy into its worst slump since the 1930s.
By bringing in private investors, the US government hopes finally to establish prices for the assets that have languished on banks’ books and constricted the flow of credit.
Relief that the details of a long-awaited scheme were finally out and hopes that it will attract enough buyers to unclog credit markets spurred a stock market rally. But analysts poring over the plan’s details wondered whether the scheme would reach a critical mass to spur economic recovery and some highlighted its lopsided nature — the potential for profits for private investors and the brunt of potential losses being borne by the taxpayer.
Nobel Prize-winning economist and New York Times columnist Paul Krugman slammed Geithner’s plan in his Monday column. He said it was a rehash of a “cash-for-trash” proposal the Bush administration floated last fall, and that the incentives meant investors could profit if asset values increase but “walk away” if they fall.
Meanwhile, Obama is urging a more tempered response to public furor over bonuses paid to executives of the publicly rescued insurance giant American International Group (AIG). He was virtually certain to use a televised news conference last night to continue an effort that began over the weekend: cooling the anti-AIG ferocity that threatens to undermine his efforts to bail out the financial sector.
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