G-8 Finance Officials Prepare for Economic Recovery

♦ 06/13/2009 ♦ Leave a comment

Written by Janet

The G8 industrialized nations, have begun preparing for an economic recovery, acknowledging on Saturday “signs of stabilization in our economies” and agreeing to ask the International Monetary Fund to study ways to unwind hefty stimulus packages.

The group’s finance officials said that although the global economy is still weak, so-called exit strategies from monetary and fiscal stimulus measures — like tax cuts and lower interest rates — were “essential to promote a sustainable recovery over the long term.”  the ministers have asked the IMF to analyze potential strategies to assist with the process.

However, ministers from the U.S., Japan, Germany, France, Britain, Italy, Canada, Russia and the European Union added that the “situation remains uncertain and significant risks remain to economic and financial stability” and stressed their commitment to provide any more stimulus the economy might need.

The financial markets have rallied the past 3 months.  But the US and Britain are worried that European countries haven’t done enough for the recession. The World Bank forecast on Thursday the global economy will contract 3.0 percent this year, far worse than a previous estimate of minus 1.75 percent.

Germany has been a particularly strong critic of the lower interest rates, tax cuts and measures to boost the money supply that have been employed by countries including Britain and the United States, warning they are potentially inflationary and deficit-building.

As the ministers met in a medieval castle in Lecce, about a thousand anti-globalization protesters marched peacefully through the historic center of the southern Italian town in protest of the meeting, shouting slogans including “G-8, economy, lies,” and carrying banners urging debt cancellation.

There was no mention in the communique of public stress tests on major banks — Geithner had said earlier this week that he would explain the rigorous public stress tests conducted on 19 of America’s biggest banks to his counterparts.

Britain has conducted the tests, but released less detail on the results than the United States, while Germany has argued they could undermine the fledgling economic confidence.

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