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.
(Page 2 of 2)
An IMF report released last week held that only the US, Saudi Arabia, China, Spain, and Australia have hit the 2 percent stimulus goal. Germany, by way of contrast, has pumped about 1.5 percent of its GDP into the domestic market via new government spending. The French stimulus equals about 0.75 percent of GDP.Skip to next paragraph
Subscribe Today to the Monitor
Furthermore, the US wants the IMF to continue to produce an international stimulus report card, by issuing data quarterly on country efforts scaled against GDP.
“We believe it is important for [nations with the world’s largest economies] to commit to substantial and sustained actions for a period that matches the likely duration of the crisis,” said Geithner on March 11.
Double IMF's money
European nations have reacted enthusiastically to the proposal to double IMF resources. The European Union, in a joint policy statement prior to this weekend’s meetings, said that it is “essential” that the IMF have the means to help weaker countries fight the crisis.
The US’ appeal for more stimulus spending, however, has met with a much cooler response.
EU finance ministers insisted that they were already doing enough to pump up their own spending. The richest nations of the single-currency eurozone – Germany, France, and Italy – are wary of running up bigger deficits and launching a round of inflation. The call to increase stimulus efforts as soon as possible appears to have caught them off-guard.
“There was a significant amount of bewilderment about this in our discussion,” German Finance Minister Peer Steinbrueck said on March 10.
Instead, the Europeans would like the upcoming financial summit to focus on means of regulating international banking and currency flows, so as to prevent future crises with similar roots to today’s.
Short term vs. longer term
The cooperation needed now is of two sorts, according to Ralph Bryant of Brookings. With financial fires already raging, existing fire brigades must fight the problem now with efforts including economic stimulus packages.
But because existing firehouses, their equipment, and regulatory codes are inadequate, medium- and long-term efforts to improve the situation via new regulations may be required.
In other words, both US and European priorities may be necessary.
“The world didn’t seem ready a year ago [to address these problems in a coordinated manner],” says Bryant. “Now we’ve got a huge emergency and people ought to be rethinking their positions.”
– Associated Press material was used in this report.