- The Washington Times - Saturday, March 14, 2009

HORSHAM, ENGLAND (AP) - International finance officials worked Saturday to find common ground amid deep divisions on how to tackle the global downturn, with key players trying to inject optimism into talks that many fear could result in little real progress.

British Treasury chief Alistair Darling, the host of the gathering of finance ministers and central bankers from the Group of 20 nations, said that he was confident of making progress and that discussions over dinner Friday evening were “very useful.”

The G-20 officials, representing countries that account for more than 80 percent of the world economy, are in conflict over over whether to use fiscal stimulus _ big spending packages and tax cuts _ or better regulation to drag the world economy out of its slump.

The run-up to the gathering in a luxury hotel south of the British capital was marked by a trans-Atlantic dispute, with pointed comments from Washington that Europe was not doing enough to match up to U.S. efforts on the fiscal stimulus front. That notion has been rejected by countries including Germany and France, which, wary of loading up debt, have said that current remedies need to be evaluated and the focus put on regulatory reform.

The debate has led many to fear that the gathering of finance chiefs will fail in its task set a common agenda on key issues for a full summit of G-20 heads of state and government on April 2, a major concern as black economic clouds continue to roll in.

The World Bank warned this week that the global economy will shrink this year for the first time since World War II and the United States reported Friday that its trade deficit plunged in January to the lowest level in six years as the economic downturn cut America’s demand for imported goods, dashing hopes of a U.S.-led recovery.

China, meanwhile, has been battered by a plunge in global demand for its goods, with exports falling 25.7 percent in February.

With so much at stake, Darling and other officials at the meeting near Horsham, some 30 miles (about 50 kilometers) south of London, have attempted to paper over those cracks _ at least publicly.

“I’m quite sure that today we will make progress as part of the lead up to the meeting of leaders and finance ministers in London in April when we need to be concentrating on the three big issues of supporting our economy, getting bank lending going again and of course ensuring that not just some of the world, but all of the world is helped by what we do,” Darling said at the opening session Saturday.

On the agenda after a series of bilateral meetings and the working dinner on Friday, are talks about principles for financial regulation and supervision, restoring credit channels and the reform of the International Monetary Fund.

French Finance Minister Christine Lagarde told reporters on Friday that she was optimistic that the meeting, which ends later Saturday, could get results on fixing the financial system.

But in a guarded message to U.S. officials who have criticized Europe’s stimulus efforts for not going far enough, she added that nations needed “to evaluate the remedies already put in place by each of us.”

European nations claim that increased spending on social welfare and unemployment is a form of stimulus that will support the economy _ and makes the total European Union rescue package higher than the U.S. program.

The International Monetary Fund estimates that only Saudi Arabia, Australia, China, Spain and the United States will introduce budget boosts worth 2 percent of gross domestic product this year, the level that U.S. Treasury Secretary Timothy Geithner considers “reasonable.”

Japanese Finance Minister Kaoru Yosano said he told Geithner during a bilateral meeting on Friday evening that Japanese Prime Minister Taro Aso is working on additional measures that would likely mean Japan’s efforts would exceed that level.

Yosano added that the United States and Japan agreed on the necessity of beefing up regulations on the international financial system but also agreed that tackling the financial crisis was the top priority.

Complicating matters, China has raised warnings about what Washington’s drive to spend its way out of recession might do to U.S. government debt, which Beijing holds in large quantities. Chinese Premier Wen Jiabao has sent the U.S. a warning not to devalue the dollar _ and China’s estimated $1 trillion in dollar-denominated U.S. government debt _ through reckless spending.

One thing both U.S. and European officials do agree on is the need to increase funding to the International Monetary Fund so it can help countries in trouble. The 16 nations that use the euro agreed this week to urge governments to double the IMF’s resources to $500 billion and give it a key role overseeing risks to the global economy.


AP business writers Aoife White and Greg Keller in Horsham, England, contributed to this report.

Copyright © 2019 The Washington Times, LLC. Click here for reprint permission.

The Washington Times Comment Policy

The Washington Times welcomes your comments on Spot.im, our third-party provider. Please read our Comment Policy before commenting.


Click to Read More and View Comments

Click to Hide