WASHINGTON (Reuters) - The United States tried to instill confidence on Thursday that the global recovery was not at risk as global finance chiefs gathered to advance a plan to prevent future economic crises.
Finance ministers and central bankers from the world’s top economic powers are weighing the risks from high oil prices, huge government debt and Japan’s recent disasters.
Canadian Finance Minister Jim Flaherty said Thursday that addressing the imbalances between export-rich and debt-burdened countries that have long plagued the global economy was a top for priority for meetings in Washington of industrialized and developing countries..
The Group of Seven developed nations began its meeting on Thursday, ahead of meetings of the larger Group of 20 rich and emerging country.
U.S. Treasury Secretary Timothy Geithner, speaking at a conference on the global economy, said the recovery from the 2007-2009 financial crisis was intact and that investment and hiring were starting to pick up.
“Despite the risks in oil, the financial challenges still facing parts of Europe, despite what’s happened in Japan ... what you see is gradual healing, gradual strengthening in confidence that the world economy is going to be growing at a reasonable rate,” he insisted.
To prolong recovery, G20 officials were to push forward at a working dinner Thursday night with plans to build a world economy less prone to the booms and busts that have marked the past two decades.
That would involve shrinking imbalances between export-rich countries such as China and debt-burdened ones such as the United States.
The G20, which accounts for about 85 percent of the global economy, hopes to complete work this week on “guidelines” to assess whether specific countries were saving or spending too much, although naming who was running afoul would come later.
French Finance Minister Christine Lagarde suggested the biggest G20 economies — those representing 5 percent or more of the group’s output — might get special scrutiny. That would likely include the United States, Japan, Germany, China and France.
“That is the threshold we consider as appropriate and relevant,” she said.
As officials gathered, Greek borrowing costs hit new highs. Investors were spooked as Germany suggested a debt restructuring may be unavoidable.
Athens is struggling to cut spending enough to meet commitments made in return for a 110 billion euro ($160 billion) bailout from the European Union and International Monetary Fund.
Other officials said talk of a possible restructuring was misplaced.
“There is no discussion of debt restructuring as far as Greece is concerned. None whatsoever,” France’s Lagarde said.
The G7 countries — the United States, Britain, Canada, France, Germany, Italy and Japan — are meeting behind closed doors Thursday evening to assess the economic damage from Japan’s earthquake and uprisings in the Arab world.
The IMF, which holds its twice-yearly meetings this weekend, warned officials not to grow complacent about the recovery’s prospects simply because the worst of the financial crisis has passed.
“The apex of the crisis is behind us, but it would be part of the complacency I am trying to avoid to believe we are in a post-crisis era,” IMF chief Dominique Strauss-Kahn said.
Much of the G20 gathering, which continues on Friday, will focus on securing the deal to monitor global imbalances, such as excessively large trade deficits or surpluses.
China has expressed suspicion that the effort may be aimed at pressuring it to bring down its hefty trade surpluses.
China’s foreign exchange reserves — a stockpile that reflects Beijing’s exporting prowess — soared to a record of more than $3 trillion by the end of March, a sum certain to raise eyebrows in Washington.
The G20 has become the premier forum for figuring out how to make sure there is no recurrence of the financial crisis that triggered the worst global recession since World War Two.
Leaders agreed in 2009 to shrink imbalances, but as the world economy recovers, the group has found it difficult to agree on how to lay the groundwork for more stable growth.
Lagarde also said officials hoped for progress toward reforming the world monetary system, a top priority for France, which chairs the G20 this year.
The G20 has been working on a plan to include the Chinese yuan in the basket of currencies that makes up the IMF Special Drawing Right, a unit of account between IMF member nations.
Progress, however, has been slow, in part because of China’s policy of keeping the yuan on a tight leash. SDR currencies are supposed to be “freely usable.”
“So, we are ... not yet there, but there is a willingness on all sides and an open-mindedness,” Germany’s deputy finance minister, Joerg Asmussen, told Reuters.
Reporting by Reuters IMF/G20 team; Editing by Tim Ahmann and Leslie Adler