G-20 officials convene for talks on global economy
WASHINGTON – WASHINGTON (AP) — Finance officials from the world's major countries believe the global economy is in far better shape than it was a year ago, but they are worried that a growing debt crisis in Greece could cause the hard-won gains to unravel.
Some are also concerned about the failure so far to achieve consensus on the steps needed to toughen regulations to make sure the financial crisis that triggered the worst recession since the 1930s is not repeated.
Finance ministers and the heads of central banks from the Group of 20 major economies were to participate in daylong talks Friday at the International Monetary Fund. The G-20 is composed of the world's richest industrial countries and fast-growing developing nations such as China, Brazil, South Korea and Russia.
The United States was being represented by Treasury Secretary Tim Geithner and Federal Reserve Chairman Ben Bernanke. The talks Friday were being held in advance of weekend meetings of key policymaking boards of the 186-nation IMF and its sister lending institution, the World Bank.
The administration is hoping the G-20 will endorse a set of financial reforms that will complement the sweeping overhaul that President Barack Obama is seeking to get approved in Congress. The U.S. measure was scheduled for an initial showdown vote in the Senate on Monday.
The administration believes the United States, the world's largest economy, must show resolve in fixing the flaws exposed by the financial crisis or the momentum for global reform could falter. However, the G-20 nations were finding it tough to reach a consensus in a number of key areas, including a call by the IMF to boost taxes on financial institutions to pay for future bailouts.
Canadian Finance Minister Jim Flaherty said Thursday, "I'm not going to impose a tax on our banks that performed well during the crisis."
In addition to overhauling rules governing banks' capital and liquidity standards and the regulation of exotic financial instruments such as derivatives, the finance officials were also scheduled to discuss efforts to assemble an IMF support package to rescue debt-burdened Greece.
Greek Finance Minister George Papaconstantinou was scheduled to meet with IMF Managing Director Dominique Strauss-Kahn on Saturday. Greece is seeking support from European governments and the IMF for a standby rescue package that it hopes it will not need.
But with investors demanding punishingly high interest rates, the chances that Greece will get by without an IMF-supported rescue seemed increasingly remote.
"It's clear that the Greek situation is a very serious one," Strauss-Kahn told reporters Thursday. "There is no single way, no silver bullet to solve it in an easy manner."
French Finance Minister Christine Lagarde, speaking to a Washington think-tank late Thursday, said she was confident Greece would be able to successfully implement an austerity program full of "very hard and harsh measures" being demanded by the other governments as a condition for support.
The G-20 talks were being held at a time when the global economy is showing signs of improvement. The IMF released a new outlook for the meetings that forecast growth this year of 4.2 percent, significantly better than the 0.6 percent drop in activity last year, the biggest plunge in the post-World War II period.
Strauss-Kahn, however, cautioned that the recovery was still "fragile," with wide discrepancies between different regions. China, now the world's third-largest economy, and other emerging Asian economic powers are surging ahead, followed by more moderate growth projected for this year in the United States and sluggish growth expected in much of Europe.
The Group of 24, composed of finance officials from developing nations in Africa, Latin America and Asia, issued its own communique Thursday, calling on the rich nations to avoid erecting protectionist trade barriers to deal with the economic slump.
They also said the IMF and World Bank should overhaul their governing structures to give greater voice to developing nations, a move that Obama and other G-20 leaders endorsed at a leaders' summit last September in Pittsburgh.
The G-20 leaders will meet again in June in Toronto. The discussions among the finance officials were designed to make progress on the financial reform plan that will be presented to the leaders.
The finance officials were also debating ways to meet another goal set by leaders of pursuing more balanced global growth. Countries such as the United States are expected to show how they plan to narrow their trade and budget deficits while surplus countries such as China were expected to present plans for boosting domestic growth and relying less on exports.
The Obama administration has been urging China to allow its currency to rise in value against the dollar, a move American manufacturers contend would narrow the trade gap between the two nations and save U.S. jobs. The Chinese have responded with their own complaints about the lack of a credible Obama plan to control U.S. budget deficits that have climbed above $1 trillion annually. China is the largest foreign holder of U.S.-government debt.
Associated Press writer Foster Klug contributed to this report.