IMF endorses G7 action plan .. some respite for the stalling economy?

[PeaceForAll]

Finance chiefs endorse G7 action plan: IMF panel

2 hours, 40 minutes ago

WASHINGTON (Reuters) - Finance leaders from the International Monetary Fund's 185 member countries on Saturday endorsed a plan announced by major economies to chart a course out of the credit crisis.


The International Monetary and Financial Committee (IMFC), chaired by Egyptian Finance Minister Youssef Boutros-Ghali, called for "exceptional vigilance, coordination, and readiness to take bold action" to address the crisis.

Boutros-Ghali said the fact that all 185 IMF member countries, including emerging and developing economies, supported the Group of Seven plan.

"We are committed to the plan of action," Boutros-Ghali said. "This is an essential element for restoring confidence."

The G7 on Friday vowed to take all necessary steps to unfreeze credit markets and ensure banks can raise money, but offered no collective course of action to avert a deep global recession.

IMF Managing Director Dominique Strauss-Kahn said the committee agreed the IMF should take the lead in looking more in depth at what went wrong and coordinate with other institutions.

He said the fund was the right forum for the job, given its universal membership, and that the IMF stood ready with resources to help any country facing financial difficulties due to the crisis.

The IMF cautioned that emerging economies may experience spillover effects from the financial crisis and it was important that they preserve economic stability.

"For these reasons, it is critically important that collaborative action be coordinated between advanced and emerging economies," the panel said.

In advanced economies, the committee said, policies need to provide "essential stimulus in the face of the risk of a pronounced economic downturn, as confidence in the financial system is restored."

(Reporting by Lesley Wroughton, Editing by Chizu Nomiyama)

I am waiting to see what their strategy will be.. Hope they make sure there is no 'great depression' in the offing..

 

[pkpatriotic]

Global financial system on brink of meltdown: IMF
Sunday, October 12, 2008

WASHINGTON/COLOMBEY-LES-DEUX-EGLISES, France: The IMF warned on Saturday that the global financial system was on the brink of meltdown, while France and Germany pushed ahead with a pan-European crisis response to try to prevent the worst global downturn in decades.

At a joint news conference, French President Nicolas Sarkozy and German Chancellor Angela Merkel said they had "prepared a certain number of decisions" to present at a Sunday meeting of European leaders as they work feverishly to restore blocked credit markets to working order.

The United States appealed for patience, but the International Monetary Fund stressed that time was running short after leading industrialized nations failed to agree on concrete measures to end the crisis at a meeting on Friday.

"Intensifying solvency concerns about a number of the largest US-based and European financial institutions have pushed the global financial system to the brink of systemic meltdown," IMF chief Dominique Strauss-Kahn said.

President George W Bush huddled with Group of Seven economic chiefs and officials from the IMF and World Bank, and said top industrial nations grasped the gravity of the crisis and would work together to solve it.

Confidence has been in short supply and panic has swept through global markets, driving stocks to a five-year low on Friday and prompting banks to hoard cash. That has choked off lending to businesses and households, threatening to turn a global economic slowdown into a dangerously deep recession.

US Treasury Secretary Henry Paulson said risks to the global economy were "the most serious and challenging in recent memory."

An emergency meeting of euro zone leaders on Sunday will discuss a bank rescue package, taking a British initiative to guarantee lending between banks as a reference point, a source close to the French presidency said.

France's Sarkozy said euro zone countries were working on a joint solution, but declined to provide specifics. He planned to meet with British Prime Minister Gordon Brown shortly before Sunday's euro zone gathering.

Germany was also considering injecting capital into its banks, Merkel said on Saturday.

The world's rich nations vowed on Friday to take all necessary steps to unfreeze credit markets and ensure banks can raise money but they offered no specifics on a collective course of action to avert the recession threat.

In a surprisingly brief statement after a 3-1/2 hour meeting, the G7 — the United States, Britain, Canada, France, Germany, Italy and Japan — stopped short of backing the British interbank lending guarantee, something many on Wall Street saw as vital to end growing market panic.

European Central Bank President Jean-Claude Trichet said markets needed time to digest a series of dramatic steps taken by world central banks in recent days, including pouring billions of dollars into financial markets and lowering interest rates in the broadest coordinated cut on record.

 

[pkpatriotic]

European leaders close in on finance crisis battleplan
Monday, 13 Oct, 2008


European leaders and Eurogroup representatives pose for a group photo during a crisis summit at the Elysee palace in Paris. -AP Photo

PARIS: Fifteen European leaders closed in Sunday on a joint strategy to end the haemorrhaging of market confidence by underwriting inter-bank loans and safeguarding financial institutions from collapse.

In a bid to prevent further meltdown when markets resume trading on Monday, French President Nicolas Sarkozy sought to persuade the 15 member states of the eurozone single-currency bloc to approve a 14-point joint action plan.

After urging his peers gathered in Paris to speak 'with one voice,' Sarkozy presented a draft statement, whose most eye-catching pledge was to guarantee new medium-term loans between private banks in a bid to kick-start lending.

This offer would stand for an 'interim period' and would see governments underwriting new loans of up to five years “on appropriate commercial terms” by a variety of means, including issuing securities.

As the leaders discussed the draft, Belgian Finance Minister Didier Reynders briefed reporters that the eurozone countries should have until Wednesday to decide how much each will set aside.

'What we need now is for each country to fix the sum that it wants to put aside. This should happen by Wednesday,' Reynders said on the sidelines.
On Wednesday, all 27 European Union leaders will meet in Brussels. The leaders were also expected also commit themselves to preventing any bank collapse and would step in to recapitalise failing institutions.

'We confirm today our commitment to act together in a decisive and comprehensive way in order to restore confidence and proper functioning of the financial system,' according to a copy of the draft statement seen by AFP.

'Governments remain committed to avoid any failure of systemically relevant institutions, through appropriate means including recapitalisation.' Before joining his 14 eurozone colleagues, Sarkozy held bilateral talks with Prime Minister Gordon Brown of Britain, which does not use the euro currency, to talk about his plans to partially nationalise some of Britain's banks.

After briefing the other leaders, Brown said he expected confidence to be restored to the markets in a matter of days.

'I believe that in the next few days confidence in the banking system will be restored,” Brown told reporters. 'The decisions we take over the next few days will affect us for the years ahead.'

Brown believes that confidence can only be restored if governments follow his lead in providing funds to not only prop up individual banks, but to free up loans between institutions that keep capital markets moving.

Brown's government has set aside 250 billion pounds (315 billion euros) to guarantee this trade, in addition to 200 billion pounds in short-term loans and 50 billion to buy stakes in major banks.

Upon entering the talks, German Chancellor Angela Merkel said the summit would send a 'very important signal' to calm down the markets.

Sarkozy confirmed there would be an emergency cabinet meeting on Monday to examine a plan to guarantee interbank loans, followed by an address by the president to the nation in which he would 'announce a number of measures.' Lawmakers said a law on guaranteeing French banks would go before parliament this week.

And in Germany, Europe's biggest economy, press reports said that Merkel's government would announce after the summit a rescue package worth several hundred billion euros for its banks.

Berlin is expected to guarantee interbank loans with between 300 and 400 billion euros (405 to 540 billion dollars) and to provide banks with fresh capital in exchange for shares in the banks, as in the British plan.

Portugal's finance minister also announced Sunday that his government was offering a 20-billion-euro state guarantee for banks headquartered in that country.

 

[PeaceForAll]

I am waiting to see what exactly these people will do.

 

[pkpatriotic]

World Bank terms economic crisis “A man-made catastrophe”
Monday, October 13, 2008

WASHINGTON: The World Bank agreed Sunday to help developing countries strengthen their economies, bolster their financial systems and protect the poor against the financial turmoil in international markets.

Robert Zoellick, the bank's president, said the contagion affecting the global economy “has been a man-made catastrophe and responses to overcome it lie in all our hands.''

He spoke as the U.S. moved to shore up Wall Street and financial institutions and the 15 countries that use the euro agreed in Paris to temporarily guarantee bank refinancing to ease the credit squeeze.

Speaking at a joint news conference with Zoellick, Dominique Strauss-Kahn, the head of the International Monetary Fund, endorsed the European move and said he expected markets to react favorably “although you never can be sure what will happen.''

Strauss-Kahn also called for quick implementation of the $700billion U.S. rescue plan that includes the government buying part ownership in an array of banks.

Zoellick said as the current crisis has unfolded people in the United States and Europe reacted first with confusion, then anger and then fear.

“Those natural reactions will spread around the world as the impact spreads, Zoellick said. “We need to take them seriously.''

He said developing countries; many of them already hit by high prices for energy and food, risk serious setbacks to their efforts to improve the lives of their populations from any prolonged tightening of credit or a sustained global slowdown

“The poorest and most vulnerable groups risk the most serious and in some cases permanent damage,'' Zoellick said. “100 million people have already been driven into poverty this year and that number will grow.''

Zoellick said the financial crisis underscored the need for “concerted global action now not just to deal with the crisis but to put in place new architecture, new norms and new oversight to ensure that this crisis never happens again.''