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US urges a global economic fix

Ahead of the G-20 finance ministers’ meeting, Obama calls for allies to increase stimulus efforts – and meets a cool response.

By Staff writer of The Christian Science Monitor / March 12, 2009

German Chancellor Angela Merkel, French President Nicolas Sarkozy, center, and Italian Prime Minister Silvio Berlusconi talked in February.

Hannibal Hanschke/Reuters/File

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Washington

Attempts by individual nations to fix their own economies are important. But the great recession now rippling around the world is an international problem, and the best way to fight it may be a more aggressive international response.

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That’s the message President Obama and Secretary of the Treasury Timothy Geithner are sending in advance of this weekend’s meeting in London of finance ministers from 20 advanced and developing nations.

This doesn’t mean the US government wants to establish a multinational treasury that will run the globe from an island lair. But it does mean that Washington thinks key European and Asian nations need to spend more on economic stimulus – and that over the next few months the US hopes to establish some general principles for greater cooperation on everything from International Monetary Fund resources to regulation of banks.

“We need to make sure we’re working together ... we need to begin to establish a framework,” said Federal Reserve Chairman Ben Bernanke in a March 10 appearance at the Council on Foreign Relations.

Leaders meet April 2

World leaders, including Mr. Obama, will meet in London on April 2 for a global financial summit. The finance minister meetings this weekend are intended to serve as a general planning session for the April 2 gathering.

On March 11, Secretary Geithner outlined an ambitious international agenda, including a 10-fold increase, to as much as $500 billion, in the size of the reserves that the International Monetary Fund can draw upon to help countries in economic trouble.

The US’s share of this expanded rescue fund would be an extra $100 billion. The cash is used for loans, not direct grants, but increasing the US’s commitment to the IMF could be tough to sell to Congress at a time when the bill for domestic aid already boggles many lawmakers’ minds.
The intent of increasing the IMF’s lending power is to help stabilize emerging markets and developing nations that can’t afford big stimulus packages.

“We do desperately need to get the IMF additional resources as soon as possible,” says Ralph Bryant, a senior fellow and specialist in the global economy at the Brookings Institution in Washington.

More world stimulus

The second major item on the US agenda for the global finance meetings is an attempt to cajole other developed nations into spending more to stimulate economic demand in their own countries.

The United States’ recently passed stimulus bill amounts to about 5.5 percent of the nation’s gross domestic product. US officials want the rest of the world to pump up domestic spending with stimulus packages of at least 2 percent of their own GDPs.

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