Ministers seek way to strengthen economic recovery


By HARRY DUNPHY and MARTIN CRUTSINGER, Associated Press Writers

WASHINGTON – Global finance ministers are looking for ways to strengthen a fragile recovery and ease friction over currencies.

They also want to preserve the close international coordination that brought them together in 2008 to prevent the looming threat of the worst recession since the end of World War II, and to avert a return to narrow domestic-oriented policies.

Ministers headed Saturday into steering committee sessions for the 187-nation International Monetary Fund and its sister lending institution, the World Bank.

The Group of Seven major industrialized countries and rising powerhouses in the G-20, such as India, China and Brazil, held informal sideline meetings over the weekend in the run-up to a G-20 summit in South Korea. At the meeting in Seoul, leaders are expected to try to resolve many of the issues that the finance ministers are grappling with.

“We are gathering at a pivotal moment facing a very uncertain future,” the head of the IMF, Dominique Strauss-Kahn told delegates. “Growth is coming back but we all know it is fragile and uneven.”

He said the ministers promised their constituents a lot but “we didn’t deliver enough. So we need to go for growth, we need to go for jobs but we also need to go for change” in the international financial system.

Addressing an issue that formed the backdrop for three days of meetings, Strauss-Kahn said a particular threat to the recovery came from talk of currency wars. He urged ministers to stop trying to manipulate their currencies and to abandon “this idea that currencies can be used as a weapon.”

He said it was understandable some countries wanted to resist the volatility and instability that come with huge capital inflows by revaluing their currencies to protect their exports “but it cannot be a long-lasting solution.”

Canadian Finance Minister James Flaherty told reporters that the global economy would be the loser if nations followed “beggar-thy-neighbor” currency policies that invite retaliation by other nations.

“There are consequences that are bad for a world economic recovery that is fragile by … countries maintaining relative inflexibility in their currencies,” Flaherty said .

Strauss-Kahn and several of the delegates have suggested that more cooperation among nations is needed to improve the international monetary system instead of governments turning inward and focusing on domestic problems.

The global economy is still struggling to emerge from the worst recession since the end of World War II, said Strauss-Kahn. Unless the pace of job growth quickens, he said, “we really face the risk of a lost generation” of young people unable to get work.

In recent days, the Obama administration has increased pressure on China to allow its currency to rise in value against the dollar as a way to boost U.S. exports.

Various other nations, including Japan, Brazil and South Korea, also have taken steps to keep their currencies weaker in an effort to increase their exports.

Treasury Secretary Timothy Geithner said that China’s resistance to a faster appreciation of the yuan imperils progress in combatting the global recession.

“Our initial achievements are at risk of being undermined” by countries that are relying on exports for growth instead of building up their domestic demand, Geithner said.

Geithner called on the IMF to play a larger role in monitoring economic actions in its member countries, saying such surveillance could be critical in preventing the next crisis.

But Chinese officials continued to insist that their gentle efforts to revalue their currency was the best approach to take.

“China will move the exchange rate gradually,” Zhou Xiaochuan, head of China’s central bank, said during a panel discussion Friday. “We will do it in a gradual way rather than shock therapy.”


Source: Associated Press

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