The G20 meeting in Washington on Friday was overshadowed by the Greek debt crisis as the group prepared to negotiate key stumbling blocks such as financial regulation, bank taxes and currency rates.
REUTERS - World finance leaders will seek to assure global markets on Friday that economic recovery is in place despite the cloud cast by debt-troubled Greece and its request for a huge bailout. A draft communique from finance chiefs from the Group of 20 nations said the global economy is regaining its footing, though at an uneven pace, a G20 source told Reuters.
G20 members, meeting at the International Monetary Fund's headquarters, will stress the need for rebalancing that growth -- code for saying big surplus countries like China must consume more and be more flexible on currency rates, while the indebted like the United States need to tighten up spending.
In a sign of the sensitivities over the currency issue, which has a rising number of countries pressuring Beijing to let its yuan rise in value, the communique will not specify actions for individual countries but would refer to a broad mechanism for balancing growth.
The meeting was overshadowed by Greece's appeal to its European Union partners and the IMF for emergency loans of up to 45 billion euros ($60.5 billion), potentially the biggest-ever bailout of a country.
"We are prepared to move expeditiously on this request," IMF Managing Director Dominique Strauss-Kahn said.
The timing for Greek aid was uncertain, but its need for debt restructuring is so acute that it cannot be long.
"The process is under way," French Economy Minister Christine Lagarde said on her way into the G20 meeting. "Everybody has to do their homework now."
Finance officials from Europe stressed that other euro zone countries with budget deficits and slow growth rates were not at risk of a Greek-style crisis.
European Central Bank Governing Council member Ewald Nowotny dismissed as "unfounded" speculation that other southern European countries might be holding discussions about aid.
The Group of 20 rich and emerging countries, meeting before semi-annual meetings of the IMF and World Bank at the weekend, are searching for common ground on a variety of reforms to prevent a repeat of the credit crisis that led to a global recession.
Some are controversial and all require give-and-take, from settling differences over how to regulate banks to giving fast-growing emerging economies more clout.
The G20 has essentially supplanted the smaller G7 club of advanced economies, an acknowledgment the global financial crisis emanated from the rich world, which now needs help from fast-growing emerging powerhouses.
G7 finance ministers met separately over dinner on Thursday night at Canada's embassy, a stone's throw from the U.S. Capitol, but issued no communique in a reflection of the group's diminished standing.
They do have problems, though, notably on how to get a firmer grip on reckless bank behavior blamed for pushing the global economy into a recession that has only lately begun to lift.
The sharpest divisions were over bank taxes, with Canada strongly opposed and Britain pushing for support. Finance ministers are expected to discuss two bank tax ideas proposed by the IMF. The Fund will then present a report to G20 heads of state who are meeting in Toronto in Ju
"There is a lot of resistance to the tax on banks. Canada is not isolated," a G20 source said.
President Barack Obama on Thursday chastised Wall Street for resisting an overhaul of U.S. financial regulation, a priority for his administration.
There is widespread agreement that global cooperation in pumping some $5 trillion in stimulus money into the global economy shook it out of the torpor it had entered in late 2007 and 2008 amid a U.S.-led financial crisis.
But the global government spending has left most advanced economies shouldering debt burdens approaching World War Two highs, with Greece's fiscal troubles underlining just how risky that can be.
The issue of rebalancing global growth also is loaded with potential pitfalls. Reducing imbalances means China and other export-dominated economies must adopt policies to support domestic growth, which means letting currencies rise more rapidly and investing in social safety nets to try to promote consumer spending. That could cool growth in the short run and make it hard to create sufficient jobs for a rapidly growing population.
Fellow developing economy heavyweights Brazil and India, plus the European Union, have called for a stronger yuan in recent days although officials arriving in Washington ahead of the G20 meeting made few comments about the Chinese currency.
Date created : 2010-04-23