US TREASURY secretary Timothy Geithner reassured Group of Seven (G7) counterparts about his plan to rescue the US financial system and was urged to press ahead with the effort to clean up toxic assets and revive lending.
“It is a comprehensive plan, the intent is there, the will is there,” Bank of Canada governor Mark Carney said. “The question is implementation and execution.”
Mr Geithner came under fire from US lawmakers and investors last week for failing to provide details on how he plans to shore up banks clobbered by $756 billion (€587 billion) in credit losses. The SP 500 Index dropped 4.9 per cent, the most since January 20th, to 827.16 on the day of his announcement. Stocks fell over the week by the most since November.
Finance ministers and central bankers from the G7 meeting in Rome were looking to Mr Geithner to provide specifics on his $2 trillion plan to tackle the financial crisis that started in the US 18 months ago and has since spread across the globe.
The G7 predicted a “severe” economic slump that will persist for most of 2009. Reports last week showed Germany’s economy, Europe’s largest, contracted the most in 22 years in the fourth quarter and US consumer confidence neared its lowest since 1981. Policymakers are seeking a co-ordinated approach to stanching the economic damage that’s prompting companies including Caterpillar, Nissan and Alcatel-Lucent to lay of workers.
The G7 vowed to tackle the crisis without spelling out new initiatives to do so. Finance ministers and central bankers said in a statement that they were working to restore confidence in markets and revive the world economy. They predicted the full effect of individual countries’ rescue packages will “build over time”.
“We reaffirm our commitment to act together using the full range of policy tools to support growth and employment and strengthen the financial sector,” the statement noted.
“The stabilisation of the global economy and financial markets remains our highest priority,” the G7 statement added.
The meeting took place as the US Congress gave final approval to a $787 billion economic stimulus package that President Barack Obama says is needed to pull the world’s largest economy out of a recession.
The package contains stricter limits on executive compensation at companies receiving US funds than those proposed by the administration.
In a statement issued over the weekend, the organisation also vowed to oppose protectionism.
“An open system of global trade and investment is indispensable for global prosperity,” the statement noted. “The G7 remains committed to avoiding protectionist measures, which would only exacerbate the downturn, to refraining from raising new barriers and to working towards a quick and ambitious conclusion of the Doha round.
“The G7 also stresses the need to support emerging and developing countries’ access to credit and trade financing and resume private capital flows, and is committed to explore urgently ways, including through multilateral development banks, to enhance this support.” – (Bloomberg)
