Finance chiefs from the G7 economic powers discussed ways to revive the faltering global recovery yesterday as the US leant on Europe to reach a deal to avert a Greek bankruptcy.
The threat of a Greek default, rising oil prices, and bond market volatility are fuelling investor nervousness about the world’s economy. A slowdown in China — which was not present at the talks in Dresden, Germany — is adding to the concern.
Speaking before the meeting, IMF managing director Christine Lagarde said there was still a lot of work to do before Greece and its international lenders could clinch a cash-for-reforms deal.
“We are all in the process of working towards a solution for Greece and I would not say that we already have reached substantial results,” Ms Lagarde said.
“Things have moved, but there is still a lot of work to do,” she noted, adding that she believed Greece would fulfil its commitments.
G7 sources said officials from the member countries — hosts Germany, the US, Japan, Britain, France, and Canada — were speaking “all the time” about Greece on the sidelines of the Dresden meeting.
Greece did not come up at all during a formal symposium session yesterday, when finance ministers and central bank chiefs listened to short speeches by leading economists on how to boost growth momentum. “The word Greece wasn’t mentioned once,” a source said.
Another official said a discussion on Greece was set for today.
Athens and its EU/IMF lenders have been locked in tortuous negotiations on a reform agreement for four months. Without a deal, it risks default or bankruptcy in weeks.
Greece’s government said on Wednesday that it was starting to draft a deal with creditors that would pave the way for aid, but European officials quickly dismissed the idea that the talks had reached such a stage.
On the eve of the G7 meeting, US treasury secretary Jack Lew urged international creditors to show more flexibility. He said he feared a miscalculation could lead to a new crisis which could have consequences for the wider world.
Meeting under the heading ‘Towards a Dynamic Global Economy’, the G7 finance ministers and central bank chiefs discussed economic reforms to increase their competitiveness. Volatile markets, sensitive to differing growth paths between economic regions, risk derailing their efforts.
ECB vice-president Vitor Constancio said a sell-off in financial markets that derails the eurozone’s recovery was the biggest risk to the eurozone’s financial stability. He was speaking following a slump in Chinese stocks after several brokerages tightened requirements on margin financing.
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