Thursday 28 Mar 2024
By
main news image

WASHINGTON (Apr 18): The Group of 20 leading economies struck a hopeful tone on the outlook for global growth on Friday, even as officials fretted that Athens' inability to strike a deal with its lenders could upset Europe's tentative recovery.

In a communique after a two-day meeting, G20 finance ministers and central bankers welcomed brighter economic signs in rich nations, but lamented weakness in emerging markets.

"Risks to the global economy are more balanced since we last met," the finance officials said. "Near-term prospects in advanced economies, notably the euro area and Japan, have improved recently, while the U.S. and UK continue to record solid growth, which could support a stronger global recovery."

Still, the group of developed and emerging market nations, which represent around 80 percent of global economic output, cited challenges from an array of sources, including exchange rate volatility and geopolitical tensions.

Greece was not mentioned by name in the communique and Turkish Deputy Prime Minister Ali Babacan, speaking on behalf of the G20, said the issue of Greece did not feature in the formal discussions.

But uncertainty over whether Athens could reach agreement with its European Union and International Monetary Fund lenders over new bailout terms in time to meet big upcoming debt payments cast a cloud over the gathering and other talks on the sidelines of the IMF and World Bank spring meetings.

"The mood is notably more gloomy than at the last international gathering," British finance minister George Osborne told reporters. "It's clear now to me that a misstep or a miscalculation on either side could easily return European economies to the kind of perilous situation we saw three to four years ago."

PRESSURE ON ATHENS TO STRIKE DEAL

The new leftist government in Athens must come forward with economic reforms acceptable to the IMF and EU before bailout funds are unlocked, but the negotiations have been moving at a crawl.

"It's important that we in the coming days make significant progress, that the process gains momentum," IMF European Department Director Poul Thomsen told reporters. "There needs to be a comprehensive package, and that will clearly take several weeks or more of discussions."

The United States pressed Athens to commit more fully to discussions over the nuts-and-bolts of proposed reforms. "Not reaching agreement would create immediate hardship for Greece, and uncertainties for Europe and the global economy more broadly," U.S. Treasury Secretary Jack Lew said in a statement.

In a sign of the seriousness with which officials are taking the risk that negotiations founder, the European Central Bank has analyzed a scenario in which Greece runs out of money and starts paying civil servants with IOUs, people with knowledge of the exercise told Reuters.

Jeroen Dijsselbloem, chairman of the euro zone finance ministers group, warned that Greece and the euro zone should not try to see who could hold out longer in negotiations.

"Let's not go into a game of chicken to see who can stick it out longer. We have a joint interest to reach an agreement quickly," Dijsselbloem said.

But he acknowledged it would take at least a couple more weeks to come to an agreement between Athens and the euro zone, possibly in time for the May 11 meeting of euro zone finance ministers and just a day before Greece has to make a large loan repayment.

Concerns about Greece contributed to big stock price declines in Europe and on Wall Street, with the Dow Jones industrial average closing down about 279 points, or 1.5 percent.

BRACING FOR FED ACTION

While the G20 sounded guardedly optimistic on the global economy, it pointed to a risk of financial volatility as the U.S. Federal Reserve prepares to raise interest rates.

"In an environment of diverging monetary policy settings and rising financial market volatility, policy settings should be carefully calibrated and clearly communicated to minimize negative spillovers," the communique said.

The main worry centers on emerging markets, which have been beset by capital outflows as investors placed bets on higher U.S. interest rates. The G20 said nations could protect themselves if needed by taking steps to curb sharp capital movements.

 

 

      Print
      Text Size
      Share