Johannesburg: India and Brazil pushed for European leaders to take speedy action to resolve the region’s debt crisis and prevent the global economy from entering a double-dip recession.
A credible accord between European nations is necessary to ensure that the crisis is controlled and doesn’t affect the whole world, Brazilian President Dilma Rousseff said at a India-Brazil-South Africa (IBSA) summit in Pretoria on Tuesday. “The challenge presented by the crisis requires the substitution of the backward theories of the old world with new ideas.”
European leaders won’t fulfil any dreams of a quick end to the continent’s debt crisis at their 23 October summit, Steffen Seibert, chief spokesman for German Chancellor Angela Merkel, said on Monday. The International Monetary Fund on 20 September cut its forecast for global growth to 4% this year and next, and predicted severe repercussions if Europe fails to contain its debt crisis or if US policymakers reach an impasse over a fiscal plan. Emerging-market stocks have declined 20% this year, snapping two years of growth.
Prime Minister Manmohan Singh with President of South Africa Jacob Zuma and President of Brazil MS Dilma Rousseff arrive to attend the 5th IBSA Summit at prudential guest house in Pretoria, South Africa on Tuesday. PTI
Developing countries cannot remain untouched by the negative effects of global financial turmoil, Prime Minister Manmohan Singh said. “We hope that effective and early steps will be taken by Europe and other advanced economies to calm the capital financial markets and prevent the global economy from slipping into a double-dip recession.”
All emerging-market currencies, except China’s yuan, weakened against the dollar in the third quarter as concern that Greece would default on its debt reduced demand for riskier assets.
Still, the real has gained 31% against the dollar since the beginning of 2009, as near-zero interest rates in developed nations encouraged investors to borrow cheaply and invest in higher-yielding markets including Brazil, where the benchmark rate is 12%. South Africa’s rate is 5.5%, with the rand rising 16% over the same period. The strength of the currencies has made exports from the countries less competitive.
It’s fundamental to end monetary politics that provoke true currency wars and stimulate protectionism, Rousseff said.
The India-Brazil-South Africa political alliance was forged in 2003 to ensure the developing nations speak with a common voice globally and to promote trade and investment between them. Governments from emerging economies have also joined together to demand greater representation on international institutions such as the United Nations Security Council and the International Monetary Fund.
IMF and the World Bank should confer on emerging markets voting powers which are equal to their growing importance in the global economy, Rousseff said.
All three countries are currently non-permanent members on the UN Security Council and coordinated their votes by abstaining on a resolution recommending targeted measures against Syria’s government if it didn’t cease attacks on civilian protesters. The resolution was vetoed by Russia and China this month.
Singh called for the enlargement of the UN Security Council in order to reflect present day realities.