BRUSSELS (Reuters) - Governments need to pump more money into the global economy in a coordinated effort to counter recession, U.S. President Barack Obama’s chief economic adviser said on Monday.
Europe, though, looked set to reject the call from Larry Summers, with German Finance Minister Peer Steinbrueck saying as he entered a meeting with European counterparts in Brussels: “We are not debating any additional measures.”
Summers, in an interview in the Financial Times, said that kickstarting growth should take precedence over ironing out so-called global imbalances and that this meant everyone had to do everything to boost demand.
“The right macroeconomic focus for the G20 is on global demand and the world needs more global demand,” said Summers, who made it clear he believed this was no time for arguments about the need for the United States to save more and China a bit less, the essence of the global imbalance debate.
“The old global imbalances agenda was (about) more demand in China, less demand in America. Nobody thinks that is the right agenda now,” Summers said.
“There’s no place that should be reducing its contribution to global demand right now. It is really the universal demand agenda.”
The comments precede a meeting later this week and a summit on April 2 where leaders of the G20 group of big industrialized and developing economies are under pressure to produce a convincing response to the worst downturn in decades.
Finance ministers from the euro currency zone were meeting in Brussels the same day as Summers’ comments appeared, and were due to widen their regular discussion session to ministers from the entire 27-country European Union on Tuesday.
A document they are expected to approve at those meetings sets out Europe’s position for the G20 talks and makes clear that Europe feels it has announced sufficient fiscal stimulus for now, and that what counted was rolling out all measures rapidly and in a coordinated manner.
“Continuing international coordination of fiscal stimulus measures is key,” says the document, seen by Reuters.
Total support provided by fiscal policies in 2009 and 2010 was estimated at between 3 and 4 percent of EU GDP, and of that about one third was due to discretionary stimulus measures, it said.
Obama’s $787-billion stimulus plan, for 2009-10 but a bit longer in the case of tax cuts, amounts to about 5.5 percent of GDP.
Summers, who served as Treasury secretary in the Clinton administration, also said in the Financial Times interview the view that the market was inherently self-stabilizing had been dealt a “fatal blow.”
“This notion that the economy is self-stabilizing is usually right but it is wrong a few times a century. And this is one of those times,” he said.
(Reporting by Jan Strupczewski and Dave Graham in Brussels and
Christina Fincher in London, writing by Christina Fincher and
Brian Love; editing by Dale Hudson)
Our Standards: The Thomson Reuters Trust Principles.