World finance leaders meet amid signs of recovery
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World finance chiefs from the G7 and G20 countries have met in Washington to assess progress on combating the global economic crisis. Some of the officials gathered in the US capital also reported possible "green shoots" of recovery.
AFP - World finance chiefs were meeting Friday to assess progress on combating the worst global economic crisis since the 1930s Great Depression, with some officials suggesting a recovery is taking shape.
The Group of Seven industrialized nations and the Group of 20, which includes the G7 and developing countries such as Brazil, China, India and Russia, were holding back-to-back gatherings in Washington on the eve of IMF and World Bank spring meetings.
As finance ministers and central bank governors of the G7 -- Britain, Canada, France, Germany, Italy, Japan and the United States -- met behind closed doors, investors on Wall Street were cheering better-than-expected US economic and corporate news.
The US Federal Reserve's announcement that most of the big banks undergoing "stress tests" were well-capitalized gave an extra fillip to the optimism.
US Treasury Secretary Timothy Geithner, the host of the G7 and G20 meetings, pointed to positive signs emerging amid the severe crisis.
"In recent weeks, there have been some encouraging signs that the global economic downturn may be slackening," Geithner wrote in an opinion piece in Friday's Financial Times.
"Conditions in some financial markets have improved and the decline in world trade may be abating," he added.
Across the Atlantic, European stocks rallied on positive data that stoked fresh optimism the tide may be turning.
"Financial markets, to varying degrees, have begun to price in economic recovery," said Julian Callow at Barclays Capital.
"A key issue for the weeks and months ahead will be whether economic indicators improve in a way that validates this."
Some officials gathered in the US capital also reported "green shoots" of recovery, albeit tentative.
An IMF official said there were early signs the economic crisis is easing in Europe but any real recovery would depend on the return to health of the stricken banking sector.
"I think we are all hopeful that this is really the beginning of a changing situation," said Marek Belka, head of the IMF's European Department when asked about several recent indicators which suggest the slump is bottoming out.
At the same time, "we are careful, very cautious, about describing it as a turning point," he said,.
The IMF director for Latin America, Nicolas Eyzaguirre, said the region could reach the bottom of the downturn this quarter and begin to recover in the third quarter.
"Our best estimate at this moment is that the Latin American region should touch bottom more or less in this quarter and from there begin to recover," he said at a news conference.
"By contrast, the advanced economies are going to touch bottom in principle in 2010," he said, mainly because of their troubled banking sectors.
The IMF projected the global economy will contract 1.3 percent this year and grow only 1.9 percent in 2010 in its World Economic Outlook report Wednesday.
The US Fed, meanwhile, in an initial report on the health of the top US banks, said most "currently have capital levels well in excess of the amounts required to be well capitalized."
There have been concerns the banks would require even more taxpayer money to stabilize them and so the markets responded positively to the announcement which was taken to mean they may be in better shape than first thought.
Britain's finance minister, Alistair Darling, said that cleaning up banks' balanced sheets was vital to end the crisis.
"A lot of banks have impaired assets that need to be dealt with," Darling told the Council on Foreign Relations, a Washington think-tank.
"Whatever happens, it's got to be sorted out," he said, adding: "If you keep discussing it ... we're losing time."
The IMF has estimated more than four trillion dollars of soured assets are weighing on the balance sheets of US, European and Japanese banks in the crisis, much of that total still undeclared.
Finance chiefs at the G20 meeting later Friday will assess progress in the three weeks since G20 leaders pledged in London to fight the crisis with stimulus measures and reform of financial sector regulation.
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