Chancellor George Osborne and Bank of England governor Mark Carney are mounting a joint exercise with the US to gauge the transatlantic response to the collapse of a huge multi-national bank.
They will join US Treasury secretary Jacob Lew and Federal Reserve chairwoman Janet Yellen on Monday in the exercise to determine how authorities in both countries would deal with such a banking failure.
Finance ministers from the world’s largest economies, meeting in Washington, were addressing continuing efforts to strengthen financial regulation to prevent a repeat of the 2008 financial crisis, the worst disruption of the banking system since the 1930s.
They said they were determined to prevent a slide into another global recession, but Mr Lew expressed frustration that a number of key nations were not doing enough to increase growth.
After two days of discussions, the G20 finance ministers unveiled plans for a world initiative to build roads and other infrastructure projects to help boost global growth by two trillion dollars (£1.25tn) over the next five years and create millions of jobs.
But they conceded that this longer-run effort will not help with the pressing problems of weak growth in Europe and other parts of the world and Mr Lew said governments in Europe, Japan and China were failing to deliver needed support.
“European leaders should focus on recalibrating policies to address persistent demand weaknesses,” he said in comments prepared for a session of the policy-setting committee of the International Monetary Fund.
Weak reports on industrial production and trade out of Germany, Europe’s largest economy, jolted financial markets and raised worries that Europe could be headed for another recession. US stocks endured their worst week since May 2012, with the losses continuing yesterday when the Dow Jones industrial average slid 115 points.
It was against this backdrop that G20 finance ministers and central bank presidents met for talks in advance of the annual meetings of the 188-nation IMF and its sister lending institution, the World Bank.
Mr Lew did not mention Germany by name, but it was clear that his remarks on Europe focused on the nation’s reluctance to do more to stimulate growth. He said “countries with external surpluses and fiscal flexibility” needed to increase their efforts to promote stronger growth. Germany ran a large trade surplus last year.
He said economic risks in China had risen and that country had ample resources to adjust its policies to support domestic-led growth. Mr Lew described Japan’s prospects as uncertain “with growth projected to remain weak this year and next”, and said it needed to move “decisively” to put in place needed structural reforms in its economy.
Speaking at a news conference, Japanese finance minister Taro Aso said his economy, the world’s third largest, was not weakening even though growth had slowed in the April-June quarter.
“We are still on the track to recovery” and the nation was starting to emerge from its prolonged period of deflation, he said.
The G20 group is led this year by Australia, which will host a leader’s summit next month in Brisbane.
Australian treasurer Joe Hockey, who chaired the finance discussions, told reporters that the plan the G20 group has developed involved more than 900 individual projects with the potential to lift growth by 1.8% over the next five years. He said all the details would be revealed at the leaders’ summit.
While developing the five-year plan for infrastructure projects, the G20 finance officials were less successful in their efforts to deal with the immediate threats from the slowdowns in Europe, Latin America and China. The group did not issue a communique, but individual finance ministers said the economic problems were discussed in the sessions.
“We as a group do not want to settle for mediocre growth,” Canadian finance minister Joe Oliver said after the G20 discussions ended yesterday. “We don’t think we have to.”
IMF managing director Christine Lagarde said that while the problems facing the global economy were well known, “action in the past has lacked”.
She said: “This time, the challenge is for real. We must aim higher, try harder and work better together to achieve higher growth outcomes.”
The finance ministers also addressed a growing health crisis in the Ebola virus outbreak.
World Bank president Jim Yong Kim, an infectious diseases and public health expert, called for the creation of a new pandemic emergency facility that would respond rapidly to future health emergencies by delivering money to countries in crisis.
“Even as we focus intensely on the emergency response (to Ebola), we must also plan for the next epidemic, which could spread more quickly, kill even more people and potentially devastate the global economy,” he said.
Both the policy-setting committees of the bank and the IMF are expected to address the Ebola crisis at their meetings today.