U.S. to push for new economic world order at G20
WASHINGTON (Reuters) – The United States wants world leaders to agree this week to launch a major rethink of the world economy in November as they try to strengthen the global economy after its near meltdown.
Documents outlining the U.S. position ahead of the September 24-25 Pittsburgh summit of Group of 20 leaders said exporters, which include China, Germany and Japan, should consume more, while debtors like the United States must boost savings.
“The world will face anemic growth if adjustments in one part of the global economy are not matched by offsetting adjustments in other parts of the global economy,” said the document obtained by Reuters.
Obama, cutting through the coded diplomatic courtesies, made the case more bluntly for a change in business as usual.
“We can’t go back to the era where the Chinese or Germans or other countries just are selling everything to us, we’re taking out a bunch of credit card debt or home equity loans, but we’re not selling anything to them,” he said on Sunday.
The framework proposed by U.S. policy-makers foresaw “candid, even-handed and balanced analysis” of G20 members’ economic policies by the International Monetary Fund to figure out if they were consistent with balanced growth.
“We call on our finance ministers to launch the new framework by November,” the document said, signaling a determined effort to maintain the momentum for change created by last year’s global financial crisis.
Finance ministers and central bankers from the G20 countries are due to meet November 7-8 in Scotland.
The IMF will play a central role in this process of “mutual assessment” by making policy recommendations to the G20 every six months based on its assessment of global economic developments and emerging patterns of demand.
Taxpayer money to the tune of $5 trillion has been pumped into the world economy to keep it from seizing up since the beginning of the crisis last September.
G20 leaders will maintain that pace of stimulus while acknowledging that at some point it will have to be wound down, the document said.
But, mindful of how a disorderly rush to raise interest rates could roil world markets again, they will also ask finance ministers to thrash out a “transparent and credible” exit strategy.
There were no details of how to achieve this in practice, but the document echoed the caution of G20 finance ministers at their meeting in London earlier this month acknowledging the pace of change would vary by country.
“The scale, timing and sequencing of this process will vary across countries and across the type of policy measures,” the document said.
European Central Bank President Jean-Claude Trichet said on Monday that persuading Europe, the United States and China to accept International Monetary Fund advice on economic polices may be difficult.
In the past many countries have ignored advice dished out in regular reviews by the IMF.
Trichet told French newspaper Le Monde that the G20 had made progress on reforms to make the financial system more stable after the crisis.
“But the most difficult question is still open: Europe, America, China, are they ready to modify their macroeconomic policies in the future — by following the advice of the IMF and under pressure from their peers, for the common good, and world economic stability?” he said.
G7 sources told Reuters there was a renewed determination to act to stem the global imbalances because the crisis had underlined the interconnectedness of the financial system and how joint action could be more effective.
(Additional reporting by Anna Willard in Paris and Darren Ennis in Brussels; Editing by Chizu Nomiyama )