Finance chiefs assure markets but take little action
Tuesday, 23 October 2007
WASHINGTON, Oct 22 (AFP): Global finance leaders at weekend meetings put a brave face on recent upheavals on world markets, insisting calm was returning, but offered investors no assurances an end to the turmoil was now in sight.
Finance ministers and central bankers from the world's most powerful nations, the Group of Seven, also steered clear of a brewing row between some members of the eurozone and the United States over the continued slide in the dollar.
The G7 warned after talks Friday that a fifth year of healthy world economic growth was now threatened by high oil prices, US housing market woes and financial market uncertainties that were expected to persist "for some time."
That assessment was echoed Saturday by policymakers at the International Monetary Fund, who agreed that "downside risks" to the world economy had intensified. But ministers also noted that the functioning of most markets had improved, thanks in part to the overall health of major financial institutions.
Markets around the world have been shaken since August by a credit crisis, a byproduct of the meltdown in the US subprime-or high-risk-mortgage market.
Looking ahead, however, the Group of Seven powerhouses came forward with no concrete intitiatives to shore up shaky markets and instead called on traders and investors to police themselves.
"We expect market participants to address many of the shortcomings that were exposed by recent events," said finance chiefs from Britain, Canada, France, Germany, Italy, Japan and the United States.
The G7 said it preferred to await the conclusions of a report on ensuring market stability from an international body, the Financial Stability Forum, expected in April.
The Group of Seven in addition made no mention of ratings agencies, whose assessments of the risk attached to certain securities have been questioned in the latest crisis.
Prior to the meeting, press reports had said European and US officials could press for a separation of the advisory and notation services of the agencies.
The IMF too came under fire from developing country ministers for what they said had been the Fund's failure to foresee the recent financial meltdown.
The ministers said the IMF should perhaps spend as much time monitoring advanced economies, where the turbulence originated, as it does the economies of less developed countries.
"The Fund had little to say that was practical about this crisis," commented Brazilian Finance Minister Guido Mantega. "It has been excessively cautious in its recommendations."
But IMF Managing Director Rodrigo Rato countered that the Fund last April was "already very clearly stating our worries about the subprime segment in the United States."
In another example of inaction, the Group of Seven Friday offered merely warmed-over commentary on currency imbalances, simply repeating that exchange rates should reflect economic fundamentals.
In its closely watched communique, the G7 instead turned up the heat on China, calling on Beijing to allow "an accelerated appreciation" of the yuan.
The United States and several of its trading partners have repeatedly urged China to adopt a more flexible currency regime, contending that the Chinese yuan is being held artifically low and thereby giving Chinese exports an unfair advantage on world markets.
But the ministers made no mention of the eroding dollar, notably against the euro.
The greenback Friday plunged to an historic low as the euro rose to a record 1.4319 dollars, largely on fears for the continued good health of the US economy in the face of surging oil prices.
The slide in the dollar has caused consternation in the eurozone, where it is seen as depressing the competitivity of European exports and threatening growth.
But eurozone hopes that the G7 might make crystal clear that the dollar needed to appreciate were dashed.
Eurozone officials had to make do with a post-meeting-and well-worn-comment from US Treasury Secretary Henry Paulson, who said: "I believe a strong dollar is in our nation's interest."
Finance ministers and central bankers from the world's most powerful nations, the Group of Seven, also steered clear of a brewing row between some members of the eurozone and the United States over the continued slide in the dollar.
The G7 warned after talks Friday that a fifth year of healthy world economic growth was now threatened by high oil prices, US housing market woes and financial market uncertainties that were expected to persist "for some time."
That assessment was echoed Saturday by policymakers at the International Monetary Fund, who agreed that "downside risks" to the world economy had intensified. But ministers also noted that the functioning of most markets had improved, thanks in part to the overall health of major financial institutions.
Markets around the world have been shaken since August by a credit crisis, a byproduct of the meltdown in the US subprime-or high-risk-mortgage market.
Looking ahead, however, the Group of Seven powerhouses came forward with no concrete intitiatives to shore up shaky markets and instead called on traders and investors to police themselves.
"We expect market participants to address many of the shortcomings that were exposed by recent events," said finance chiefs from Britain, Canada, France, Germany, Italy, Japan and the United States.
The G7 said it preferred to await the conclusions of a report on ensuring market stability from an international body, the Financial Stability Forum, expected in April.
The Group of Seven in addition made no mention of ratings agencies, whose assessments of the risk attached to certain securities have been questioned in the latest crisis.
Prior to the meeting, press reports had said European and US officials could press for a separation of the advisory and notation services of the agencies.
The IMF too came under fire from developing country ministers for what they said had been the Fund's failure to foresee the recent financial meltdown.
The ministers said the IMF should perhaps spend as much time monitoring advanced economies, where the turbulence originated, as it does the economies of less developed countries.
"The Fund had little to say that was practical about this crisis," commented Brazilian Finance Minister Guido Mantega. "It has been excessively cautious in its recommendations."
But IMF Managing Director Rodrigo Rato countered that the Fund last April was "already very clearly stating our worries about the subprime segment in the United States."
In another example of inaction, the Group of Seven Friday offered merely warmed-over commentary on currency imbalances, simply repeating that exchange rates should reflect economic fundamentals.
In its closely watched communique, the G7 instead turned up the heat on China, calling on Beijing to allow "an accelerated appreciation" of the yuan.
The United States and several of its trading partners have repeatedly urged China to adopt a more flexible currency regime, contending that the Chinese yuan is being held artifically low and thereby giving Chinese exports an unfair advantage on world markets.
But the ministers made no mention of the eroding dollar, notably against the euro.
The greenback Friday plunged to an historic low as the euro rose to a record 1.4319 dollars, largely on fears for the continued good health of the US economy in the face of surging oil prices.
The slide in the dollar has caused consternation in the eurozone, where it is seen as depressing the competitivity of European exports and threatening growth.
But eurozone hopes that the G7 might make crystal clear that the dollar needed to appreciate were dashed.
Eurozone officials had to make do with a post-meeting-and well-worn-comment from US Treasury Secretary Henry Paulson, who said: "I believe a strong dollar is in our nation's interest."