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G20 ministers meet to safeguard recovery amid eurozone woes

G20 ministers meet to safeguard recovery amid eurozone woes
AFP
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First Published: Wed, Jun 02 2010. 10 37 AM IST
Updated: Wed, Jun 02 2010. 10 37 AM IST
Seoul: Finance ministers from the world’s biggest economies will meet in South Korea this week to try to shore up a global recovery threatened by the eurozone debt crisis.
Ministers and central bank chiefs from the Group of 20 will assess the world’s economic health and discuss ways to achieve sustainable and balanced growth, according to host South Korea.
Its finance ministry said they will also consider regulatory reforms to avert a replay of the 2008-2009 slump, discuss the fiscal soundness of each nation and stress global cooperation in the timing of exit strategies.
The meeting scheduled for 4-5 May in the southern city of Busan will prepare for a G20 summit in Toronto on 26-27 June of the top developed and developing nations.
The talks are overshadowed by the European debt crisis, which has roiled world stock and financial markets and sent the euro plunging.
The G20 is the premier global economic forum, with members accounting for 90% of the world’s gross national product and 80% of world trade.
Chinese Premier Wen Jiabao, who oversees the world’s third biggest economy, gave a stark warning Monday of dangers ahead.
“Some people argue that the global economy has already recovered and that we can now take stimulus exit measures but I think that judgment is too early,” Wen told business leaders in Tokyo.
“We need to prepare for (future) difficulty. The debt crisis in some European countries may impede Europe’s economic recovery and bring change to European markets,” Wen said.
“China will make sure it maintains a sense of crisis.”
Naoto Kan, finance minister of number two economy Japan, said the currency turmoil sparked by Europe’s debt crisis could be a key topic in Busan because it affects exporters to the continent.
Some of Europe’s trading partners fear weaker growth there will mean less demand for their products. A sickly euro also makes those products more expensive for customers.
If the world economic outlook becomes gloomier, that in turn could make China more reluctant to heed US calls to let the yuan rise.
Seoul’s finance ministry said in a statement that policymakers would consider options proposed by the International Monetary Fund to achieve strong, lasting and balanced growth.
Also on the agenda will be ways to recoup taxpayer-funded bailouts and secure funds to brace for future turbulence.
A bank levy is supported by European powers and the United States, but resisted by some developing nations plus Canada and Australia -- who argue that they didn’t create the fiscal mess and shouldn’t have to pick up the tab to clear it up.
“Canada is, and will remain, opposed to a tax that would penalise financial institutions that remained strong and prosperous while many of the world’s banks failed,” Industry minister Tony Clement said last month.
Talks on the bank levy are continuing, South Korea’s finance minister Yoon Jeung-Hyun told reporters Tuesday. “I expect the talks to be concluded at the November summit in Seoul,” he said.
Many believe there should be some regulations to control international capital flows and chances of this issue being discussed at Busan are high, Yoon added.
Reforms to international credit rating agencies, which were widely criticised for getting too close to their customers and missing danger signs, are also on the Busan agenda.
Changes to the IMF to give developing countries a bigger say will likely be discussed.
Korea is also pushing the idea of a global financial safety net so that developing countries do not feel the need to pile up huge foreign exchange reserves.
US Treasury secretary Timothy Geithner said last week the United States and Europe broadly agree on the need for tighter lending rules for banks.
While noting differing approaches on regulatory matters, Geithner said the world was “in a very good position to put in place a much better system than we had going into this crisis”.
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First Published: Wed, Jun 02 2010. 10 37 AM IST