Global economy remains fragile
Monday, 26 April 2010
Merle David Kellerhals
Jr. in Washington
President Obama and four other world leaders wrote an open letter to the members of the Group of 20 (G20) industrialised and developing economies warning that it is essential to follow through on reforms they promised at two recent summits, because the "recovery in the world economy remains fragile."
"Current strains illustrate the continuing risks to global economic and financial stability," the letter from the five members of the G20 steering group said.
"Without co-operative action to make the necessary adjustments to achieve [strong and sustainable growth], the risk of future crises and low growth will remain," the leaders said in the letter. Copies were released in Washington and other world capitals.
The letter was signed by Obama, British Prime Minister Gordon Brown, Canadian Prime Minister Stephen Harper, French President Nicolas Sarkozy and South Korean President Lee Myung-bak, who form the steering group of future and past hosts of G20 summits.
The group of advanced and emerging economies met in London in April 2009 and then in Pittsburgh in September 2009 to plan financial reforms. The reforms are intended to steer the global economy away from the effects of cyclical swings from expansive growth to recession. The meetings came as the world was still reeling from the fallout of the worst recession since the 1930s.
Canada is hosting a G20 Summit in Toronto June 26-27, and South Korea will host a summit in Seoul November 11-12. A country that hosts a summit sets the agenda after consultations with other members.
Because of the recession that began in December 2007, G20 leaders opted to hold meetings twice a year to set goals and policies, and also to review efforts and share information on effective measures to resolve the global economic crisis.
G20 leaders have called for increased regulation of the financial, banking and investment sectors in an effort to rein in excessive risk taking and destabilising market speculation. The US Congress is considering legislation aimed at overhauling financial regulation in the United States.
"We need to design co-operative strategies and work together to ensure that our fiscal, monetary, foreign exchange, trade and structural policies are collectively consistent with strong, sustainable and balanced growth," the leaders said. "We all understand that ongoing trade, fiscal and structural imbalances cannot lead to strong and sustainable growth."
G20 leaders have created a framework designed to shrink trade surpluses in export-rich countries such as China and boost savings in debt-laden nations including the United States. In an effort to balance the global economic system, the G20 agreed that member nations with sustained, significant deficits should undertake policies to support private savings and undertake fiscal consolidation while keeping markets open and strengthening export sectors.
G20 nations with sustained surpluses pledged to strengthen domestic sources of growth by increasing investment, reducing market distortions, boosting productivity, improving the social safety net for their citizens, and lifting constraints imposed on growth.
In a speech last year on Wall Street, the president called on the nation's financial industry to work with him and Congress in crafting a new regulatory system to prevent a future economic catastrophe. Obama said the US economy is beginning to return to normal as a result of interventions in the marketplace by the federal government. But he warned the financial sector that "normalcy cannot lead to complacency."
"We need strong rules of the road to guard against the kind of systemic risks that we've seen," Obama said.
"We will not go back to the days of reckless behaviour and unchecked excess that was at the heart of this crisis, where too many were motivated only by the appetite for quick kills and bloated bonuses," Obama said. "Those on Wall Street cannot resume taking risks without regard for consequences, and expect that next time, American taxpayers will be there to break their fall."
The letter also addressed the long-stalled Doha trade-liberalisation talks and the need to continue to resist protectionist pressures during times of economic stress.
"The G20 must go beyond merely advocating for trade and against protectionism. With regard to Doha, we need to determine whether we can achieve the greater level of ambition necessary to make an agreement feasible," the letter said. The five G20 leaders said nations must reduce domestic trade barriers through bilateral and regional negotiations.
GROUP OF 20: The G20, established in 1999 in the wake of the 1997 Asian financial crisis, brought together advanced and emerging economies to stabilise global financial markets. The first meeting was held in Berlin in 1999.
The G20 holds annual meetings of finance ministers and central bank governors to discuss measures to promote financial stability and to achieve sustainable economic growth.
.................................................
Courtesy: A release by the US Department of States' Bureau of International Information Programmes through the US Embassy in Dhaka
Jr. in Washington
President Obama and four other world leaders wrote an open letter to the members of the Group of 20 (G20) industrialised and developing economies warning that it is essential to follow through on reforms they promised at two recent summits, because the "recovery in the world economy remains fragile."
"Current strains illustrate the continuing risks to global economic and financial stability," the letter from the five members of the G20 steering group said.
"Without co-operative action to make the necessary adjustments to achieve [strong and sustainable growth], the risk of future crises and low growth will remain," the leaders said in the letter. Copies were released in Washington and other world capitals.
The letter was signed by Obama, British Prime Minister Gordon Brown, Canadian Prime Minister Stephen Harper, French President Nicolas Sarkozy and South Korean President Lee Myung-bak, who form the steering group of future and past hosts of G20 summits.
The group of advanced and emerging economies met in London in April 2009 and then in Pittsburgh in September 2009 to plan financial reforms. The reforms are intended to steer the global economy away from the effects of cyclical swings from expansive growth to recession. The meetings came as the world was still reeling from the fallout of the worst recession since the 1930s.
Canada is hosting a G20 Summit in Toronto June 26-27, and South Korea will host a summit in Seoul November 11-12. A country that hosts a summit sets the agenda after consultations with other members.
Because of the recession that began in December 2007, G20 leaders opted to hold meetings twice a year to set goals and policies, and also to review efforts and share information on effective measures to resolve the global economic crisis.
G20 leaders have called for increased regulation of the financial, banking and investment sectors in an effort to rein in excessive risk taking and destabilising market speculation. The US Congress is considering legislation aimed at overhauling financial regulation in the United States.
"We need to design co-operative strategies and work together to ensure that our fiscal, monetary, foreign exchange, trade and structural policies are collectively consistent with strong, sustainable and balanced growth," the leaders said. "We all understand that ongoing trade, fiscal and structural imbalances cannot lead to strong and sustainable growth."
G20 leaders have created a framework designed to shrink trade surpluses in export-rich countries such as China and boost savings in debt-laden nations including the United States. In an effort to balance the global economic system, the G20 agreed that member nations with sustained, significant deficits should undertake policies to support private savings and undertake fiscal consolidation while keeping markets open and strengthening export sectors.
G20 nations with sustained surpluses pledged to strengthen domestic sources of growth by increasing investment, reducing market distortions, boosting productivity, improving the social safety net for their citizens, and lifting constraints imposed on growth.
In a speech last year on Wall Street, the president called on the nation's financial industry to work with him and Congress in crafting a new regulatory system to prevent a future economic catastrophe. Obama said the US economy is beginning to return to normal as a result of interventions in the marketplace by the federal government. But he warned the financial sector that "normalcy cannot lead to complacency."
"We need strong rules of the road to guard against the kind of systemic risks that we've seen," Obama said.
"We will not go back to the days of reckless behaviour and unchecked excess that was at the heart of this crisis, where too many were motivated only by the appetite for quick kills and bloated bonuses," Obama said. "Those on Wall Street cannot resume taking risks without regard for consequences, and expect that next time, American taxpayers will be there to break their fall."
The letter also addressed the long-stalled Doha trade-liberalisation talks and the need to continue to resist protectionist pressures during times of economic stress.
"The G20 must go beyond merely advocating for trade and against protectionism. With regard to Doha, we need to determine whether we can achieve the greater level of ambition necessary to make an agreement feasible," the letter said. The five G20 leaders said nations must reduce domestic trade barriers through bilateral and regional negotiations.
GROUP OF 20: The G20, established in 1999 in the wake of the 1997 Asian financial crisis, brought together advanced and emerging economies to stabilise global financial markets. The first meeting was held in Berlin in 1999.
The G20 holds annual meetings of finance ministers and central bank governors to discuss measures to promote financial stability and to achieve sustainable economic growth.
.................................................
Courtesy: A release by the US Department of States' Bureau of International Information Programmes through the US Embassy in Dhaka