World leaders meet in Washington as crisis worsens

Published on The Brunei Times (http://www.bt.com.bn/en)
World leaders meet in Washington as crisis worsens

NEW YORK/LONDON

Saturday, November 15, 2008

WORLD leaders are meeting in Washington today to discuss ways to tackle a global economic crisis that has plunged much of Europe into its first recession since the euro currency was formed.

Leaders of the world's 20 richest nations are not expected to make any breakthroughs at the meeting, given the absence of US President-elect Barack Obama, whose involvement will be key to any global initiatives.

The crisis continues to wreak havoc on the world's major economies, with official data showing the 15-nation eurozone economy had shrunk by 0.2 per cent for the second quarter in a row, meaning it technically is in recession.

The US is probably already in recession, most economists agree, but official data showing that will not come out until January. Signs for the US economy worsened as retail sales fell a record 2.8 per cent in October, the biggest decline since comparable numbers were first calculated in 1992.

US Federal Reserve Chairman Ben Bernanke said central banks worldwide were ready to do more to support faltering growth and European Central Bank policymakers signalled further interest rates were likely. "Policymakers will remain in close contact, monitor developments closely, and stand ready to take additional steps should conditions warrant," he said in remarks prepared for delivery to an ECB conference in Frankfurt.

With Europe, as well as parts of Asia and North America, suffering, leaders of the G20 developed and emerging countries will try to find ways to ensure the crisis is not repeated.

But agreement among the G20, which represents 85 per cent of the world's economy and two-thirds of its population, is unlikely over whether more regulation of markets can protect consumers, savers and companies from the fall-out.

Washington says there should be no return to greater state control of financial markets. Much of Europe says without more regulation, a repeat of the last year's turmoil is inevitable.

British Prime Minister Gordon Brown called for more coordinated measures to spur economic growth, a policy area where there may be more consensus at the summit.

European Commission President Jose Manual Barroso said he hoped to draw more emerging economies into global financial institutions such as the International Monetary Fund, saying Europeans were ready to lower their representation to make more room for countries such as China. "There is an openness to accommodate an increased role of the emerging economies," the International Herald Tribune quoted Barroso as saying.

Work on the crisis should not stop in Washington, Russian President Dmitry Medvedev said. "I fully support the idea to hold the next summit after Washington without delays and fast enough."

Some in the West hope countries with large reserves, notably in the Gulf, will help fund the IMF, which has offered loans to economies labouring under heavy debts.

Before the eurozone reported it was in a recession, Germany, Spain and Italy all said their economies shrank in the third quarter.

France escaped, reporting growth of 0.1 per cent in the third quarter but analysts said it was a semantic debate.

In Asia, Hong Kong became the second Asian economy after trading rival Singapore to tip into recession as exports were hit in the third quarter by weakening global demand and consumers were jolted by falling asset prices. Reuters