Recession Talk As G20 Finance Ministers Meet…

• September 26th, 2011
• Posted by EUEditor

After the evident panic on global stock markets during the last week, Finance Ministers from the G20 leading economies, together with the IMF on the weekend in Washington, talked about moves towards economic stabilisation.

The Australian Treasurer, Wayne Swan, had just received the accolade of “Finance Minister of the Year” from Euromoney Magazine.

“DANGEROUS PHASE”

Falls in European share prices were in the order of five-percent on Thursday, rallying a little on Friday morning before slipping again by the close of business for the week.

With similar trends in the United States, the International Monetary Fund (IMF) was talking about a “dangerous new phase” in the world economy with “considerable weakening” in recovery from the global financial crisis of 2008.

SET OF PROBLEMS

Mr Swan (picture) on Sunday reviewed the conference of the IMF and Ministers, on the intersecting problems of the sovereign debt crisis, and pressure on banks in Europe; weakening economic performance, and revision of growth estimates, downward, especially in the United States; and volatility on the markets.

Events in the global economy were affecting confidence everywhere, having global effects, he said.

“Take a developed economy like Australia; we still get flow-through impacts on confidence … The global economy is so interconnected.”

More concerted efforts were being made, since the crisis in 2008, which came on unexpectedly to most.

“After the collapse of Lehman Brothers we stood looking into the abyss, three years ago; we have learned a lot since then.”

MAKING EU AGREEMENTS STICK

One key move would need to be European governments following through on undertakings made jointly, in the context of the “Eurozone” group in the European Union, like the July agreement to set up a second fund to provide debt relief for Greece. See EUAustralia Online, “Greek money moving …”, 15.9.11.

“It has been difficult for the Europeans to come together to implement their agreements but they are saying this will take place”, he said in a wide-ranging interview on the national television program, Insiders.

“They really need to get cracking and get those through their member parliaments, and get those really operating.

“The Europeans are absolutely determined to work through all these issues including Greece, within their existing framework.”

That reflected the public position of solidarity across the European Union.

On Friday, with down-grading of the country’s credit rating by the American firm, Standard and Poor’s (21.9.11), the Prime Minister of Italy, Silvio Berlusconi, denounced the act as “dictated by media rather than by economic reality.”

Earlier, the Greek Prime Minister, George Papandreou, had aborted a trip to Washington, called home to consult when some delegations proved recalcitrant on the extra credit proposals, at an EU Finance Ministers meeting in Poland.

Yet talk of an “orderly default” by Greece, or its exit from the Eurozone, remained unofficial, against the insistence that abandonment of a currency would cause as much trouble as persisting with it under pressure.

An observer on the margins, the financier George Soros, supported that.

“The Euro is imperfect and needs to improve but there is no alternative”, he said.

AUSTRALIAN ECONOMY

The nomination of Australia’s Wayne Swan to “world’s best treasurer” status recognised the durability of the national economy after 2008, aided by stimulus policies, at home and in China.

Euromoney, in its article on the award, noted that critics in Australia had been objecting to the scale of stimulus spending, and the obstacles to plans by the government to return budgets to surplus in the coming few years.

It said:

“Australia has struck it rich, and lucky, as it has used its natural resources to benefit from the China spending boom. But the careful stewardship of its Treasurer, Wayne Swan, has played a key role in making it the best-performing economy among the richer, developed nations. Not that he is likely to get much credit at home …”

Reference

ABC (Australia), Sydney, “Insiders” 25.9.11, 23.9.11; “Swan named ‘World’s Greatest Treasurer’”. http://www.abc.net.au/insiders/content/2011/s3325250.htm, (25.9.11).

Channel 4 News, London, “Shares fall after early rally”, 23.9.11.
http://www.channel4.com/news/markets-stabilise-after-dramatics-falls, (25.9.11).

Eric Ellis, “Finance Minister of the year 2011: Swan confounds his domestic skeptics”, Euromoney, London, September 2011.

Sean Farrell, “Threat of double-dip recession grows as global share prices fall”, The Independent, London, 23.9.11. http://www.independent.co.uk/news/business/news/threat-of-doubledip-recession-grows-as-global-share-prices-fall-2359500.html, (25.9.11).

The Independent, London, “G20 vow fails to halt stocks slide”, 23.9.11.

Pictures   Euronews, aph.gov

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