World Leaders See Global Economic Slowdown
WASHINGTON -- (Reuters) World leaders added more somber tones to their gloomy picture of a troubled world economy on
Tuesday and said the fabric of the global financial system was at risk.
President Bill Clinton, opening the annual meeting of the World Bank and International Monetary Fund, said there was a risk that an
already broad world financial crisis could widen further.
"Today the world faces perhaps its most serious financial crisis in half a century," he said, in a sober assessment of the risks facing
the world economy.
IMF Managing Director Michel Camdessus said the financial problems, which started in Thailand 15 months ago and spread across
Asia to Russia and Latin America, were now affecting the whole global economic system.
"We are speaking not just of countries in crisis, but of a system in crisis, a system not yet sufficiently adapted to the opportunities
and risks of globalization," Camdessus said. The situation was not as dire as in the late 1920s, when the world slipped into a deep
recession, but countries needed to pursue the right policies, he added.
"If we keep a steady nerve, if all countries pursue stability, structural adjustment and orderly liberalization of their economies this
crisis can be overcome."
The IMF has already revised global growth forecasts down sharply to take account of the crisis and a White House official said world
leaders were considering whether to hold a summit later this year to address the issues. The official, speaking on condition of
anonymity, said a summit could involve leaders of the Group of Seven industrial countries -- Britain, Canada, France, Germany,
Italy, Japan and the United States -- or from a larger group of countries.
The leaders could discuss what actions need to be taken to help the ailing world economy, both immediately and in the longer term,
he added. He said there had been no decision on a date and a place for such a summit. But there has been speculation of a
meeting in London in November. A gaggle of ministerial groups have been seeking solutions to the world economic crisis throughout
the current round of meetings, which started last week. They have issued reports urging transparency, accountability and banking
sector reform and agreed that the risk of recession now outweighs the risk of rising inflation.
"I am gratified that today the leading economies speak with one voice in saying the balance of risks have now shifted from inflation
to slowdown," Clinton said. "The principal goal of policy-makers must be to promote growth." He said each country should take
responsibility for growth.
The Japanese economy has been contracting all year, prompting bitter criticism in the United States that Tokyo is not doing enough
to stimulate its economy. British Chancellor of the Exchequer Gordon Brown, speaking a day before the British central bank meets
to discuss interest rates, said global economic turmoil would force the government to cut its growth forecast for 1999.
"Slower world growth makes it inevitable that growth in Britain next year will be more moderate," he said. He gave no figure, but his
statement is bound to increase pressure on the Bank of England to cut interest rates.
The United States and Canada cut their interest rates last week in a bid to shield their economies from the global contagion, but
some analysts say the rate cut did not go far enough to calm jittery financial markets.
"The Fed should certainly emulate the decline in market (interest rates) and should cut by at least a full percentage point, building
on the steps already taken," Fred Bergsten, a former White House economic advisor said on Tuesday. "In the United States, the
conditions are rife for such action."
The crisis has also plunged Asia's one-time tiger economies into deep recession and Russia's economy is set to tumble after
shocks caused by August's devaluation of the ruble and a default on some foreign debt. The financial world is now focusing attention
on Latin America, especially regional powerhouse Brazil, the biggest economy on the continent. Brazil is already in talks with the
IMF about a package of loans, estimated by bankers at some $30 billion, to boost confidence and officials see a deal in "the next
week or so." ( (c) 1998 Reuters) centraleurope.com |
