Despite Greek debt crisis, financial leaders declare stronger-than-expected global recovery

Friday, April 23, 2010

Financial leaders encouraged by signs of recovery

WASHINGTON — Despite a deepening Greek debt crisis, global financial leaders declared Friday that the world’s economy is recovering faster than expected from the worst recession in decades.

Finance ministers and central bank governors of the world’s 20 major economies credited the massive amounts of government stimulus that have been provided. Their joint statement did not address the Greek debt crisis directly, but it did say the countries were committed to continue efforts to ensure a sustained worldwide rebound from the recession.

“The global recovery is better than anticipated largely because of unprecedented efforts of the G-20 countries,” Canadian Finance Minister Jim Flaherty told reporters at a news conference with South Korean Finance Minister Yoon Jeung-hyun at the conclusion of the talks.

The G-20 is composed of the world’s wealthiest industrial countries plus major emerging economies such as China, Brazil, India, South Korea and Russia. The United States was represented by Treasury Secretary Timothy Geithner and Federal Reserve Chairman Ben Bernanke.

Geithner noted the improvements in the world economy since the G-20 finance officials met a year ago when global output was falling sharply, financial markets were frozen and millions of people were losing their jobs.

“Because of our decisive and coordinated measures at home and across the G-20, the world economy is growing and the financial system is healing,” he told reporters at a separate news conference.

The G-20 leaders papered over sharp differences over proposed new taxes on banks to keep taxpayers from being saddled with the cost of future financial bailouts. Those taxes would also be aimed at restraining the kind of excessive risk taking that led to the crisis.

The communique said that countries would work together to come up with ways to ensure that banks make a “fair and substantial contribution towards paying for any burdens associated with government interventions to repair the banking system.”

The goal is to present a plan to President Barack Obama and other G-20 leaders when they meet in late June in Canada.

Canada is leading the opposition to new bank taxes, arguing that imposing a tax would not be fair to its banks — which did not suffer costly failures in the recent crisis.

“Some countries are in favor,” Flaherty said. “Some countries quite clearly are not. It depends on whether a country has had to use taxpayer dollars to bail out their banks.”

But Geithner at his news conference said that he believed there was a broad consensus among G-20 countries on approaches to financial overhaul. He said the administration hoped to set a good example for other countries by winning congressional approval for a strong overhaul of financial regulations in the United States. Senate debate on the measure is expected to begin next week.

The rapidly escalating Greek debt crisis threatened to overshadow the G-20 talks, which were being held in advance of weekend discussions of the policy-setting panels of the International Monetary Fund and its sister lending agency, the World Bank.

Even before the talks began at the headquarters of the 186-nation IMF, the IMF issued a statement pledging an expedited review of Friday’s request by the Greek government for an emergency loan package. IMF Managing Director Dominique Strauss-Kahn scheduled one-on-one discussions for the weekend with Greek Finance Minister George Papaconstantinou.

Flaherty told reporters that the worsening debt crisis in Greece did come up during the G-20 talks on Friday.

“It’s a source of concern,” Flaherty said, noting that G-20 officials are closely following the negotiations between Greece and the IMF over a reform package that would allow the institution to provide emergency support.

As for future global problems, the G-20 repeated a pledge that all countries will work to eliminate dangerous imbalances, but it avoided prodding China to allow its currency to appreciate against the dollar, a key U.S. aim.

The Obama administration has pushed Beijing to allow its currency’s value to rise, a change that U.S. manufacturing groups contend will help lower America’s large trade deficits and help recoup some of the more than 8 million jobs lost in the United States since the recession began in late 2007.

But when asked about the issue of China’s currency, Geithner said Friday it would be in the country’s best interests to allow its currency to appreciate, but that it would be a decision for China to make. The administration has recently softened its approach on the currency issue out of concerns the tougher stance might make China hardens its position.

In addition to discussions as a group, the G-20 ministers held a series of separate meetings throughout the day Friday with individual countries.

Brazilian Finance Minister Guido Mantega said that during his meeting with Chinese Finance Minister Xie Xuren the issue of imbalances in the currency exchange system were not discussed, but instead the two talked about ways to bolster their countries’ trade with each other.

Associated Press writers Desmond Butler, Foster Klug, Harry Dunphy and Ana Azpurua contributed to this report.

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