Will tough love fix Greece’s economic woes?
MARTIN CRUTSINGER and JEANNINE AVERSA
Global finance officials are sending
Greece a tough love message: Move ahead on economic reforms and we’ll
come to the rescue with an emergency loan package
The rapidly escalating Greek debt crisis was expected to dominate
discussions at Saturday’s gathering of the 186-nation International
Monetary Fund and its sister lending agency, the World Bank.
Greek Finance Minister George Papaconstantinou was scheduled to have
a separate meetings with IMF Managing Director Dominique Strauss-Kahn,Treasury
Secretary Timothy Geithner and finance officials from Russia and Brazil.
Crippled by soaring borrowing costs, Greece triggered an emergency
aid plan Friday to draw cash from the IMF and countries that use the
euro. There’s enough money in the package to prevent Greece from
defaulting on its massive debts. Eurozone members will contribute $40
billion, while the IMF will pony up $13.4 billion this year.
Athens is already implementing a harsh austerity program that cuts
civil servants’ pay, freezes pensions and raises taxes. But the country
still faces years of painful cutbacks and doubts about its long-term
finances.
The IMF is expediting review of Greece’s request for emergency aid.
“You can read a much greater sense of urgency, and that is welcome,”
Geithner told reporters Friday following a meeting of finance officials
from the Group of 20 countries. “Based on what I heard, they (Greece)
are going to move much more quickly to put in place a strong package of
reforms.”
The G-20 is composed of the world’s wealthiest industrial countries
plus major emerging economies such as China, Brazil, India, South Korea
and Russia.
Greece’s debt crisis was discussed at the G-20 meeting and is a
“source of concern,” Canadian Finance Minister Jim Flaherty said after
the meeting. But the countries didn’t directly address the matter in
their joint communique.
The EU’s monetary affairs commissioner, Ollie Rehn, did brief the
G-20 officials on the Greek aid plan and it was discussed on the
sidelines. “Of course, we could not avoid discussing this issue,” Rehn
said. “It has potential implications for financial stability in the
European Union and globally.” Rehn said he believed the EU-IMF aid
package could be completed by early May.
French Finance Minister Christine Lagarde said she expected to have
French parliamentary approval by May 10. Other countries in the eurozone
do not have to go to their parliaments for approval, she said. “It is a
work in progress.”
Despite the deepening Greek debt crisis, global financial leaders
declared Friday that the world’s economy is recovering faster than
expected from the worst recession in decades. However, unemployment in
the United States and other countries remains high.
The G-20 members papered over sharp differences over proposed new
taxes on banks to keep taxpayers from being saddled with the cost of
future financial bailouts. The proposed new taxes would also be aimed at
restraining the kind of excessive risk taking that led to the crisis.
The communique said that countries would work together to come up
with ways to ensure that banks make a “fair and substantial contribution
towards paying for any burdens associated with Government interventions
to repair the banking system.”
The goal is to present a plan to President Barack Obama and other
G-20 leaders when they meet in late June in Canada. Canada is leading
the opposition to new bank taxes, arguing that would not be fair to its
banks, which did not suffer costly failures in the recent crisis.
“Some countries are in favor,” Flaherty said. “Some countries quite
clearly are not. It depends on whether a country has had to use taxpayer
dollars to bail out their banks.”
Geithner, however, said the Obama administration hoped to set a good
example for other countries by winning congressional approval for a
strong overhaul of financial regulations in the United States. Senate
debate on the measure is expected to begin next week.
As for future global problems, the G-20 repeated a pledge that all
countries will work to eliminate dangerous imbalances, but it avoided
prodding China to allow its currency to appreciate against the dollar, a
key US aim.
The Obama administration has pushed Beijing to allow its currency’s
value to rise, a change that US manufacturing groups contend will help
lower America’s large trade deficits and help recoup some of the more
than 8 million jobs lost in the United States since the recession began
in late 2007.
AP |