MercoPress. South Atlantic News Agency

G-20 pledged to maintain economic stimulus and asked for IMF monitoring

Strauss-Kahn: how to prevent the next crisis

Finance ministers from the Group of 20 industrialized and emerging market economies pledged to maintain economic stimulus measures until recovery from the global crisis is assured and asked the IMF to assess whether countries were on track for delivering strong, sustainable, and balanced growth to avoid future problems.

“Economic and financial conditions have improved following our coordinated response to the crisis,” the G-20 officials said in a statement. “However, the recovery is uneven and remains dependent on policy support, and high unemployment is a major concern. To restore the global economic and financial system to health, we agree to maintain support for the recovery until it is assured.”

G-20 finance ministers and central bankers, gathered in the Scottish town of St. Andrews November 6-7, committed to a timetable for a new system of keeping an eye on each others' economies, under which countries would present national and regional plans by the end of January to support sustainable recovery and job creation.

Officials want to avoid derailing the recovery by withdrawing the stimulus too soon or by leaving it so long that the resulting debt encourages investors to push up market interest rates. The IMF says the debt ratio of the advanced G-20 nations could be 40 percentage points above the pre-crisis level by 2014, threatening to drive up borrowing costs as much as 2 percentage points.

The IMF outlined in a note to the G-20 leaders a series of seven principles to consider for unwinding the stimulus when appropriate.

The fragility of the rebound was highlighted by a report on November 6 showing the US unemployment rate climbed to a 26-year high of 10.2% in October.

The G-20 officials—representing around 90% of the world's wealth, 80% of world trade, and two-thirds of the world's population—emphasized the need for quick implementation of banking industry reform, saying that stronger standards should be developed by the end of 2010, with the aim of implementation by the end of 2012 as financial conditions improve.

IMF First Managing Director Strauss-Kahn said the IMF was engaged with the G-20 in its deliberations on how the mutual assessment can be conducted and how the Fund could support and assist the G-20 efforts.. “We will ask countries to provide the overview of their policies for the next 2-3 years, and will check whether they add up—if they don't we will provide scenarios and advice.“

G-20 leaders expect members to have completed their mutual assessment by April, with the aim of providing options to discuss when they meet in June. By November, they intend to refine those policy options ”and develop more specific policy recommendations.“

”This will be the main job of the G-20 after this crisis: to prevent the next crisis,” Strauss-Kahn said. “We need to see how policies are consistent together or not.“

Asked by reporters what will happen if policies are not consistent, Strauss-Kahn said he did not expect to find that all G-20 countries’ policies were consistent with each other at present. “We need to provide advice to bridge the gap. It’s in the interest of all countries to avoid crises. If that's true, they will work on this framework.”

G-20 leaders also committed to take action to tackle the threat of climate change and work towards “an ambitious outcome” at a major UN conference in Copenhagen next month. Officials are considering a finance package to help poorer nations develop green industries and adapt to climate change.

The G-20 comprises Argentina, Australia, Brazil, Britain, Canada, China, France, Germany, India, Indonesia, Italy, Japan, Mexico, Russia, Saudi Arabia, South Africa, South Korea, Turkey, the United States, and the rotating EU presidency.