UPDATE 3-Gulf Arabs say turmoil makes monetary union urgent
(Adds background on monetary union)
By Andrew Hammond and Souhail Karam
RIYADH, Oct 25 (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 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 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."
Gulf states are trying to give a renewed push to monetary union after the plan was thrown into disarray by Oman's 2006 decision not to join and Kuwait's 2007 move to drop a dollar peg it had agreed to keep in place until the single currency was achieved.
Analysts said the project could get held back further as the Gulf deals with a likely slowdown in regional infrastructure projects and lower real growth as the Organization of the Petroleum Exporting Countries (OPEC) cuts crude oil output.
Crude prices CLc1 have dropped by more than half since hitting record levels above $147 a barrel in July.
"The retreat of the U.S. and European economy will have a negative affect on the balance of payments in GCC countries," read the meeting's agenda.
Investor confidence in the region has already taken a hit. Saudi Arabia's bourse .TASI plunged more than 8 percent on Saturday, having dropped more than 44 percent this year.
Sovereign wealth funds, meanwhile, have invested oil wealth around the world, including some high-profile buys in U.S. equities that have been hammered during a global market rout.
Policymakers talked about how to "strengthen the role of government in the financial sector", "reassess" Gulf foreign investment policies and look into ways to ensure the stability of the global oil market, the agenda said.
Al-Arabiya television reported that policymakers would discuss directing more government funds into stocks and bank accounts to bolster confidence. It did not give a source. (Writing by Daliah Merzaban in Dubai; Editing by Anthony Barker)
