WORLD TO STAY IN SLUMP

Group of Seven finance chiefs vowed to tackle a “severe” economic downturn that will persist for most of 2009 without spelling out new steps to do so.The G-7’s finance ministers and central bankers said in a statement released after talks in Rome today that they were working to restore confidence in markets and revive the world economy.They predicted the full effect of individual rescue packages will “build over time.” “We reaffirm our commitment to act together using the full range of policy tools to support growth and employment and strengthen the financial sector,” the statement said. “The stabilization of the global economy and financial markets remains our highest priority.”The policy makers met after reports yesterday showed Germany’s economy contracted the most in 22 years in the fourth quarter and U.S. consumer confidence neared its lowest since 1981. With the worst global slump since World War II battering state finances, International Monetary Fund Managing Director Dominique Strauss-Kahn said he expects more countries to need emergency aid.That’s putting governments and central banks under greater pressure to end the malaise and U.S. Treasury Secretary Timothy Geithner today urged actions that are “forceful and sustained for a period that matches the likely duration of the crisis.”
At a Loss
The authorities are still at a loss on the best course of action 18 months after the credit crisis broke out. That’s left them pursuing a disjointed approach as the global economy deteriorates further and companies from Microsoft Corp. to Nissan Motor Co. cut jobs.U.S. stocks fell the most this week since November, extending the Dow Jones Industrial Average index’s decline since the start of the year to 11 percent.“The statement ticks all the right boxes, but as expected does not go beyond generic statements of principle and commitments that we have heard before,” said Marco Annunziata, chief economist at Unicredit MIB in London. “The commitment to act in a coordinated way flies in the face of the rather uncoordinated approach that followed similar commitments last October.”Geithner, a former Treasury undersecretary in the Clinton administration, returned to the G-7 stage after a week in which investors complained his $2 trillion plan to revive lending lacked detail. His colleagues today urged him to push ahead.“On paper it looks great and the principles are certainly very good,” said French Finance Minister Christine Lagarde. “The essential thing is now to implement it.”
By Simon Kennedy and Sandrine Rastello
http://www.bloomberg.com/apps/news?pid=20601087&sid=aTKC4gmSOdIc&refer=worldwide
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