Posted by: tristar3research | February 15, 2009

G7 Finance Ministers Vow to Use “Full Range of Policy Tools”

Bloomberg reports that the weekend G7 meeting was not exactly a stunning success:

Group of Seven finance chiefs vowed to tackle a “severe” economic downturn that will persist for most of 2009 without spelling out new steps to do so. The G-7’s finance ministers and central bankers said in a statement released after talks in Rome yesterday that they were working to restore confidence in markets and revive the world economy. They predicted the full effect of individual rescue packages will “build over time.” “We reaffirm our commitment to act together using the full range of policy tools to support growth and employment and strengthen the financial sector,” the statement said. “The stabilization of the global economy and financial markets remains our highest priority.”

So here are the tools: The G-7 called the steps its members have taken to fight the turmoil “exceptional,” noting they ranged from spurring liquidity in markets and bolstering capital in banks to slashing interest rates and easing fiscal policy. Amid signs some are attempting to shield domestic companies and workers from the fallout, the G-7 said it “remains committed to avoiding protectionist measures, which risks exacerbating the downturn.”

What exactly have these “leaders” been doing for two years? Bloomberg puts it succinctly:

At a Loss

The authorities are still at a loss on the best course of action 18 months after the credit crisis broke out. That’s left them pursuing a disjointed approach as the global economy deteriorates further and companies from Microsoft Corp. to Nissan Motor Co. cut jobs. U.S. stocks fell the most this week since November, extending the Dow Jones Industrial Average index’s decline since the start of the year to 11 percent. “The statement ticks all the right boxes, but as expected does not go beyond generic statements of principle and commitments that we have heard before,” said Marco Annunziata, chief economist at Unicredit MIB in London. “The commitment to act in a coordinated way flies in the face of the rather uncoordinated approach that followed similar commitments last October.”

More Tools to be Used:

The G-7 officials also probed ways of strengthening oversight of markets before they convene next month in the U.K. with colleagues from the broader Group of 20 nations. The scope of regulation, compensation packages and risk management are all under review, their statement said.

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