Saturday, June 13, 2009

G8 prepares for economic crisis end


Geithner, right, said the world economy was still 'well below potential' [AFP]
The Group of Eight industrial nations have discussed how to prepare for an economic recovery and how to roll back rescue measures when the global financial crisis eventually is over.

Concluding a two-day meeting in the Italian city of Lecce, ministers said that although the global economy is still weak, so-called exit strategies from stimulus measures such as tax cuts and lower interest rates are "essential to promote a sustainable recovery over the long term".

The G8 - the US, Japan, Germany, France, Britain, Italy, Canada and Russia - said in a statement on Saturday that it had asked the International Monetary Fund to study ways to unwind hefty stimulus packages.

However, the group said that the outlook for the world economy remain uncertain.

"There are signs of stabilisation in our economies ... but the situation remains uncertain and significant risks remain to economic and financial stability."

Forecast revised

The IMF has raised its forecast for global growth in 2010 to 2.4 per cent.

Dominique Strauss-Kahn, the IMF chief, said the increase in the forecast was due to "improvement in the United States, in Asia and particularly in Japan".

However, he cautioned that the situation in emerging economies is "very concerning".

"We have to think about exit strategies but before the exit strategy we have to exit the crisis."

Dominique Strauss-Khan, IMF chief

"We have to stay very careful, recovery is weak ... we have to think about exit strategies but before the exit strategy we have to exit the crisis," Strauss-Kahn said.
He also said global unemployment would peak in 2011.

Timothy Geithner, the US treasury secretary, said: "I don't think we're at the point yet where we can say we have a recovery in place.

"It's too early to shift towards policy restraint."

He said the global economy was still "well below potential" and encouraging growth should still be "the main focus of policy" for world powers.

While US and Britain want the G8 to stay committed to stimulus packages, some European countries like Germany are urging the preparation of exit strategies to prevent inflation and to cut the massive debts which bailouts have brought.

Peer Steinbrueck, the German finance minister, said that rescue measures for economies hit by the crisis must "increasingly be combined with a credible exit

"This means we must now think about how will go about it once we are getting out of this hole, this valley."

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