G20 vows strong action on crisis

The world’s major economic powers are pledging to launch a bold effort to deal with a chronic slowdown in growth and a European debt crisis that are threatening to push the global economy into another recession.

But it was unclear whether their strong words would be backed up by equally strong actions.

The statement by the Group of 20 major economies in Washington late on Thursday pledged that the countries, which represent 85% of the global economy, would do what was necessary to restore financial stability and calm financial markets.

The markets had plunged on Thursday over renewed fears of a global downturn.

Those involved in the talks were the finance officials of traditional economic powers such as the United States, Japan and Germany and major emerging nations such as China, Brazil and India.

The United States was represented by Treasury Secretary Timothy Geithner and Federal Reserve Chairman Ben Bernanke.

“We are taking strong actions to maintain financial stability, restore confidence and support growth,” the G-20 statement said. “We commit to take all actions to preserve the stability of banking systems and financial markets as required.”

The G-20 group had not been scheduled to issue a statement after their dinner but the turmoil on Thursday in global markets resulted in a change in plans.

European markets rose tentatively in early trading today while US stock futures were up. In Asia, traders continued to dump stocks.

French Finance Minister Francoise Baroin told reporters the statement represented a “strong global” response to what he called a “very serious situation”.

The annual meetings today and on Saturday of the 187-nation International Monetary Fund and its sister lending organisation, the World Bank will be dominated by the European debt crisis.

A senior US Treasury official said all the G20 countries felt there was a sense of urgency to take strong actions.

The Dow Jones industrial average sank 391 points on Thursday, marking the second-straight day of massive losses on Wall Street.

IMF Managing Director Christine Lagarde said the world was entering a “dangerous phase” and World Bank President Robert Zoellick said he still believed the globe could avoid a double-dip recession “but my confidence in that belief is being eroded daily”.

Major emerging economies including Brazil, India, China, Russia and South Africa said in a statement they would “consider, if necessary, providing support through the IMF or other international financial institutions” to address the European debt crisis.

The G20 communique said the member nations planned to produce a “collective and bold action plan” to boost global growth and deal with high government debt to be unveiled in time for a summit of G20 leaders, including President Barack Obama in Cannes, France, on November 3-4. However, the communique gave no hint of what would be included in the new action plan.