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Business

EU rejects US call for bigger stimulus plans

Latest update : 2009-03-09

Euro zone finance ministers said on Monday that they will reject a US call for additional economic stimulus measures. US officials were pressing for new stimulus plans around the world to help combat the global crisis.

AFP - US and European officials clashed Monday on the need for more stimulus ahead of a global economic summit as the world's top central bankers said a rebound from the horrific slump was in sight.

US officials said they would press for additional economic stimulus measures to be undertaken at the Group of 20 summit in London next month bringing together the big industrialized and emerging economies, highlighting differences with the European approach.

White House spokesman Robert Gibbs said "there isn't one single solution to those problems," and that stimulus and regulatory reforms are needed to help combat the global crisis.

"So I don't think there's any rift at all," he said.

But later Monday, finance ministers from 16 countries sharing the euro rejected a US call for bigger economic stimulus efforts.

"The recent US calls on Europe for an additional budgetary effort do not suit us," chairman Jean-Claude Juncker told journalists in Brussels after the meeting of eurozone finance ministers.

Meanwhile central bankers from the Group of 10 industrialized countries including Britain, France, Germany, Japan and the United States meeting at the Bank for International Settlements in Switzerland said the worst of the crisis may be over.

"We have a number of elements that are suggesting that we are approaching the moment where you would have a pickup," European Central Bank head Jean-Claude Trichet said.

"I would say that we are at a level where the positives are not necessarily fully priced in."

He did not specify a turning point, but said that central bankers would not depart from prognoses delivered by global institutions of global growth at close to zero this year before stronger growth next year.

The International Monetary Fund has forecast global growth at 0.5 percent this year and 3.0 percent next year.

Private economists also said a recovery will come, although the timimg is uncertain.

"It is important to remember that at some point the cycle will be broken," said Aaron Smith at Moody's Economy.com.

"Financial markets will begin to respond to public policy measures and private sector adjustments. Pessimism will peak, and financial markets and confidence will start to recover. The economy will eventually follow."

The comments came as Japan, Asia's biggest economy, announced its first current account deficit for more than a decade and new data showed a surge in bankruptcies and welfare rolls, sending the Nikkei stock index down 1.21 percent to a 26-year low.

Investment guru Warren Buffett said recovery in the United States could take five years and compared the US recession with the devastation of the Pearl Harbor strike that brought the country into World War II.

"I've never seen Americans more fearful," Buffett, one of the world's richest men, said in a CNBC television interview. "It takes five minutes to become fearful, much more time to regain confidence."

Renewed concern over prospects for a capital-raising operation by British banking giant HSBC and a report that Asian financial assets lost 9.6 trillion dollars of their value last year further dampened sentiment.

Ratings agency Moody's downgraded the outlook on HSBC's shares to "negative" from "stable," citing the impact of the credit crunch and its huge cash call.

The finance sector was also under strain in Iceland, where the authorities shut down investment bank Straumur Burdaras -- the last of the big lenders left independent after the state seized control of three others in 2008.
 

Date created : 2009-03-09

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