World finance officials seek ways to boost growth
WASHINGTON (AP) — World finance leaders are searching for ways to promote better economic growth and stronger job creation while avoiding a dangerous slide into a global currency war.
Finance ministers from the Group of 20 nations were expected to wrap up their discussions with the release Friday of a joint communique.
The group, which includes Treasury Secretary Jacob Lew and Federal Reserve Chairman Ben Bernanke, began its discussions Thursday night with a working dinner. Those talks were a prelude to broader discussions during the spring meetings of the 188-nation International Monetary Fund and its sister lending organization, the World Bank.
The G-20 joint statement was expected to repeat a pledge the group made at its last meeting in February that members would avoid using competitive currency devaluations to gain advantages in trade.
Lew, previewing the U.S. objectives going into the meetings, said he would press Europe to do more to support growth and would maintain pressure on Japan and China to avoid lowering the value of their currencies to boost their exports at the expense of the United States and other countries.
Lew said it was important that G-20 nations "avoid a downward spiral of 'beggar thy neighbor' policies," the type of destructive trade competition that worsened the Great Depression in the 1930s.
In Europe, countries are split over how much budget austerity to pursue, with some nations resisting a push by Germany for a strong emphasis on deficit reduction.
Referring to disagreements over the issue, French Finance Minister Pierre Moscovici said Thursday that his government had chosen "to keep open the engine of growth." He said, "Germany understands that as prosperous as it is, as strong as it is, it also needs a strong France."
IMF Managing Director Christine Lagarde said that the United States, Europe, Japan and China all need to make adjustments to their current economic policies in order to boost a still-struggling global economy.
"We need growth, first and foremost," Lagarde told reporters.
She said the U.S. and many other countries should focus more on growth and less on trimming budget imbalances this year while their economies are growing at sub-par rates.
Earlier this week, the IMF lowered its outlook for the world economy this year, predicting that government spending cuts would slow U.S. growth and keep the 17-nation area that uses the euro currency in recession.
Lagarde noted that the United States had avoided the "fiscal cliff" of across-the-board tax hikes and spending cuts at the beginning of this year that could have derailed the U.S. recovery. But she said Washington had made a policy error by allowing $85 billion in across-the-board spending cuts, known as a sequester, to take effect on March 1.
She said that a priority for Europe was "to fix its frayed banking system" and also where needed to moderate its austerity programs. Lagarde noted that Spain was struggling with high unemployment and therefore the country needed more time before pursuing aggressive deficit reduction.
Lagarde rejected a suggestion that the IMF had given conflicting advice to countries such as Britain by first praising their austerity programs and then contending they were too stringent.
She said the IMF had always cautioned that if economic growth started to falter, then a country needed to moderate its deficit-cutting programs.
"We very much stand by that" advice, she told reporters.
But Eric LeCompte, executive director of Jubilee USA, an anti-poverty group, said the IMF's reduced economic forecast demonstrated "a kind of schizophrenia at the IMF" in which growth has been hurt "due to the austerity policies the IMF previously promoted."
World Bank President Jim Yong Kim told reporters that his institution welcomes creation of a new development bank being started by five of the world's emerging economic powers because new sources of capital are needed to meet the world's need to build new roads, dams and other infrastructure projects.
The leaders of Brazil, Russia, India, China and South Africa announced last month that they would create a development bank to help fund $4.5 trillion in infrastructure projects. The announcement was seen as a direct challenge to the World Bank, which has been accused by the developing world of having a Western bias.
Associated Press writer Desmond Butler contributed to this report.