Gulf Arabs say turmoil makes monetary union urgent

By Andrew Hammond and Souhail Karam

RIYADH (Reuters) - Gulf Arab oil producers said they had already taken adequate steps to deal with the impact of the global financial crisis but that turmoil on world markets had given new urgency to their plan for monetary union.

Finance ministers and central bank governors of the Gulf Cooperation Council (GCC) held an emergency meeting on Saturday to discuss coordination of their response to a global downturn that threatens to brake their region's six-year economic boom.

The states, preparing for a single currency by an unlikely 2010 deadline, emerged from the meeting with few public statements on how they would work together.

"The likely effects of the global crisis we can deal with through the measures we have already taken," Qatari Minister of Finance Youssef Kamal said after the meeting in the Saudi capital, Riyadh.

"The crisis proves how much we need a single currency and that a single central bank should be a supervisory body."

The agenda for the one-day meeting included discussion of new steps to shore up confidence in their banking sectors while reviewing regional investment plans.

Saudi Arabia, the United Arab Emirates and four other Gulf states have so far adopted separate policy responses to defrost interbank lending and boost confidence in their stock markets. The GCC also includes Qatar, Kuwait, Bahrain and Oman.

LITTLE COORDINATION

Some Gulf states have guaranteed bank deposits, eased lending restrictions, set up emergency funding facilities for their banks and invested money in ailing stocks.

"There's been no coordination in the policy announcements so far," said Paul Gamble, head of research at Riyadh-based Jadwa Investment.

After Saturday's meeting, Gulf policymakers -- who were due to hold a meeting with Saudi King Abdullah -- gave few details.

"We express our readiness that there should be permanent coordination between all of us," Kamal said. "This coordination should continue with the central bank governors in particular in order to monitor the situation."

The global turmoil has hit the Gulf region after six years of high oil prices allowed state and private investors to funnel billions of dollars into industry and infrastructure projects.

Banks are now struggling to finance these projects, leading economists and policymakers to expect project delays and forecast lower real growth as the Organization of the Petroleum Exporting Countries (OPEC) cuts crude oil output.

Crude prices have dropped by more than half since hitting record levels above $147 a barrel in July, including a fall of almost $4 on Friday despite an agreement by OPEC to cut output by 1.5 million barrels a day.