G20 split on fighting credit crunch before key meeting
Horsham — World finance ministers opened preparatory talks Friday on measures to turn back global recession ahead of an official session Saturday threatened by splits on how best to calm the turmoil.
The gathering Saturday of finance chiefs from industrialised and emerging market countries in the Group of 20 will set the stage for a summit of G20 leaders on April 2.
While the United States, the world’s biggest economy, wants a coordinated international stimulus, most of Europe is suspicious of such a move and favours tightening regulation of financial markets and institutions.
In a boost for the United States, Japan and China, the world’s second and third largest economic powerhouses, also embraced stimulus Friday.
Senior US officials including President Barack Obama’s top economic adviser Larry Summers have recently said leading nations must try to jumpstart a global recovery by pumping more money into their economies.
But that has not been welcomed in Europe, where many leaders do not want more spending amid big budget deficits.
French President Nicolas Sarkozy and German Chancellor Angela Merkel agreed Thursday to join forces at the main G20 meeting in London on April 2 to urge tighter regulation instead of more spending, in a rare show of unity.
Merkel reiterated her stance Friday, telling a press conference in Munich: "We do not think much of the idea of a new package of measures" to underpin the economy.
Obama on Thursday urged "robust" worldwide stimulus measures and a coordinated approach on regulation, although "not necessarily a super-regulator."
Despite indications of a split, he said it was "feasible" that a joint path could be agreed by the G20.
The US enacted a 787-billion-dollar (615-billion-euro) stimulus bill earlier this month, while the 27 EU countries have committed around 400 billion dollars.
Japan and China also embraced further spending to fight the economic fire Friday.
Japanese Prime Minister Taro Aso ordered a new stimulus worth a reported 200 billion dollars, while China’s Premier Wen Jiabao said his country has put aside "adequate ammunition which means that at any time we can introduce new stimulus policies."
Japan’s Finance Minister Kaoru Yosano told the Financial Times newspaper in an interview published Friday that reviving the world economy, not regulation, must be the G20’s priority.
"We all agree (on the need for better regulation), but I personally feel: are these actions necessary at a time of crisis?" he said.
"What we ask at this moment is to save the life of the world economy — not to comment about its beard".
Britain holds the rotating presidency of the G20 and its prime minister Gordon Brown said on a visit to the United States this month that the world must "seize the moment" and work together amid what he said was historic global goodwill.
Britain announced Friday that it would push for regulatory measures to cap leveraging for financial institutions at Saturday’s event.
"This is a sensible solution to keep it as a backstop against organisations over leveraging themselves," a Treasury spokesman told AFP.
The meeting, which unites finance ministers from the world’s leading and emerging economies plus representatives from bodies like the European Union, takes place in a luxury hotel near Horsham, south of London.
In the British capital itself, World Bank president Robert Zoellick meanwhile said that "2009 is shaping up to be a very dangerous year" for the global economy.
"I believe it will be a positive sign if the G20 supports extended IMF resources, condemns protectionism and supports practical solutions," he said.