HIGHLIGHTS – G20, IMF/World Bank meetings in Washington
HIGHLIGHTS – G20, IMF/World Bank meetings in Washington
SEPTEMBER 25TH, 2011 06:25 AM •
WASHINGTON, Sept 24 (Reuters) – The following are highlights of comments by finance ministers and central bankers in Washington this week for meetings of the Group of 20 and the semiannual meetings of the International Monetary Fund and World Bank.
IMF World Economic Outlook
IMF DIARY
Europe, under fire, seeks to get ahead of crisis
ECB GOVERNING COUNCIL MEMBER AND CHAIRMAN OF THE FINANCIAL STABILITY BOARD MARIO DRAGHI: ON DEBT CRISIS
“Relevant governments must play their part, by acting forcefully to strengthen fiscal positions and bolster competitiveness through structural reforms within concrete timetables.”
“At the same time, the financial industry must continue to repair and strengthen balance sheets to rebuild resilience to shocks.”
BANK OF CANADA GOVERNOR MARK CARNEY, SPEAKING TO CTV TELEVISION: ON EFSF FIREPOWER
“We’ve taken the view certainly that looking at what the Americans went through back in 2008/2009, that to get ahead of markets one needs to overwhelm the problem, and to overwhelm the problem one must use overwhelming fiscal power. And it may be that the fund put aside is not sufficient. It depends how it’s leveraged, whether it’s used as equity or debt. But our point with the Europeans, and others from outside Europe have made the point as well, (is) that they need to overwhelm this issue to get ahead of markets.”
ECB GOVERNING COUNCIL MEMBER PATRICK HONOHAN: ON LEVERAGING EFSF
“If the pot of money put by governments on the table is to be leveraged, that is definitely a separate decision especially if that leverage is to involve a central bank.” “We should not think of leveraging a public pot of funds as a free lunch.”
ON USING EFSF TO RECAPITALIZE BANKS
“The idea of injecting capital from the EFSF directly into banks is a very promising idea.”
BRITAIN’S FINANCE MINISTER GEORGE OSBORNE:
“In the eurozone, countries need urgently to implement the 21 July agreement, as the first step to resolving the sovereign debt crisis. Credible political commitments will be required in the immediate period ahead. However, it is clear that further action will be needed. The eurozone should follow the remorseless logic of monetary union through progress on institutional reform, greater fiscal integration and coordination of budget policies.”
FRENCH FINANCE MINISTER FRANCOIS BAROIN: ON THE IMF’S SDR
“The internationalisation of emerging market currencies is under way … The Fund should be in a position to support this process, the final stage of which will be the inclusion of these currencies in the SDR basket. We should not disturb this process by adding extra conditions for currencies to join the SDR basket.”
IMF ASIA AND PACIFIC DEPARTMENT DIRECTOR ANOOP SINGH: ON CHINA AND STIMULUS
“Our sense is that China has room to return to greater fiscal stimulus if needed. Our sense is that it will help them if this is done through consumption.”
U.S. TREASURY SECRETARY TIMOTHY GEITHNER: ON RISKS TO GLOBAL ECONOMY
‘Sovereign and banking stresses in Europe are the most serious risk now confronting the world economy. The commitments that euro area members have made to one another in the last 18 months have been impressive. But further action to expand the effective capacity of these commitments is still necessary to create a firewall against further contagion.”
ON NEED TO WORK WITH ECB
“Meanwhile, European governments should work alongside the European Central Bank to demonstrate an unequivocal commitment to ensure sovereigns with sound fiscal policies have affordable financing, and to ensure that European banks have recourse to adequate capital and funding to win the full confidence of their depositors and creditors.”
ON THE THREAT OF DEFAULT, BANK RUNS
“The threat of cascading default, bank runs, and catastrophic risk must be taken off the table, as otherwise it will undermine all other efforts, both within Europe and globally. Decisions as to how to conclusively address the region’s problems cannot wait until the crisis gets more severe.”
ON FISCAL POLICY
“Without additional near-term support, fiscal policy in the U.S. will be overly contractionary and the U.S. economy will likely grow below its potential in 2012.”
ON MONETARY POLICY
“As for monetary policy, inflation risks are on average, though not everywhere, less acute. This means some central banks will continue to ease policy, while some will keep rates lower longer and slow the pace of expected tightening.”
ON THE IMF’S SHORTCOMINGS
“But the Fund still falls short in assessing exchange rate policies. The Fund’s surveillance would benefit from the publication of an External Stability Report that provides a frank assessment of exchange rate misalignment and excessive reserves accumulation and progress being made in reducing global imbalances. We call on the IMF to set forth a strong and comprehensive set of proposals to address these deficiencies.”
CANADIAN FINANCE MINISTER FLAHERTY ON REFORM OF INTERNATIONAL MONETARY SYSTEM
“While much work has been devoted to strengthening the IMS over the last year, the system will not work properly so long as the global economy’s ability to adjust to shocks remains impaired by exchange rate regimes that frustrate adjustment.”
“Canada supports ongoing discussions at the IMF and in the G20 on the possible expansion of the Special Drawing Right basket of currencies. The current criteria are appropriate and a high bar for entry should be maintained.”
PEOPLE’S BANK OF CHINA GOVERNOR ZHOU XIAOCHUAN: ON EURO AREA CRISIS
“The sovereign debt crisis must be resolved promptly to stabilize market confidence, and forceful and credible fiscal consolidation measures are needed in relevant economies to alleviate sovereign debt stress.”
ON GLOBAL COOPERATION:
“Major economies need to promptly introduce clear and credible medium-term adjustment strategies to break the negative feedback loop between public sector and private financial institutions, boost market confidence, and guard against protectionism.”
ON CHINA’S ECONOMY:
China’s growth outlook remains positive. High inflation remains the top concern.
“More flexible measures will be taken in response to unpredictable changes in the world economic and financial developments.”
ON INTERNATIONAL RESERVE CURRENCY SYSTEM:
“Efforts should be made to promote a diversified international reserve currency system.
“A greater role of the SDR should be explored to improve global liquidity supply.”
U.S. TREASURY SECRETARY TIMOTHY GEITHNER, ON BBC RADIO: ON EUROPE’S DEBT SITUATION
“All of us who look at Europe going through this have to have admiration for what they are trying to do and recognize the difficulty of it but also help them understand that markets are moving much more quickly than they are moving, and these things have the classic dynamic that the longer you wait the harder it is to solve, the more expensive it is to solve, and there is a huge premium on early action.”
ON SHORTCOMINGS IN EUROPE’S EFFORTS TO DATE
“I think a necessary condition for confidence is to see governments and the central bank, particularly, working alongside each other, not at crossroads, and the absence of that has undermined what they’ve been trying to build in that context.”
ON THE NEED FOR GOVERNMENTS AND THE ECB TO SHARE ACTIONS
“What we did in the United States … not right away, it took us a bit of time but we got a framework in place where we worked very carefully alongside the central bank and (made) sure that the fiscal authorities were absorbing the risk in the central bank’s actions, so that they were free to help resolve our crisis without calling into question their core basic mandate.”
NIGERIAN FINANCE MINISTER NGOZI OKONJO-IWEALA:
“While growth (in Sub-Saharan Africa) has remained robust, some vulnerability exists. Many LICs remain vulnerable to the resurgence of the global fuel and food price increases which is slowing down rebuilding of fiscal buffers as a result of pressures to protect social spending”. “LICs also face inadequate financing of priority development projects in the face of possible decline in aid flows as well as slow recovery in exports with the persistent slow recovery in advanced economies”.
