Global money troubles
October 31, 2012
OECD Secretary General Angel Gurria, WTO Director General Pascal Lamy, ILO Director General Guy Ryder, IMF Director Christine Lagarde and World Bank President Jim Yong Kim - when these five get together, they discuss the most significant international policies.
It was the German government which in 2007, during its presidency of the G8 and European Union, suggested the leaders of these international finance and economic organizations regularly meet with heads of state, in order to bolster cooperation.
The most pressing concerns are currently the debt crisis, high unemployment in many countries and global economic growth. According to a projection by the International Monetary Fund (IMF), the global economy will grow by only 3.3 percent in 2012 and 3.6 percent in 2013.
Risks to the global economy are evident, said German Chancellor Angela Merkel after meeting with the five organization heads in Berlin. "Economic growth isn't where we'd like it to be," Merkel stated - an important point, since growth is a key factor in managing the debt crisis.
'Tepid growth'
The situation in Greece was not explicitly discussed at the meeting in Berlin. But IMF chief Lagarde and World Trade Organization (WTO) Director Lamy, in particular, did not mince words with regard to Europe.
For the eurozone, recovery depends on moving forward with comprehensive reforms and improving competitiveness, according to Lagarde. She demanded some degree of negotiation between central banks and said that political measures must be implemented.
Debt rates are still at an unsustainable level in most industrialized countries, Lagarde said. Governments must revise their budgets "at a sensible pace," she added.
"I would characterize the situation as that of a laborious recovery out of the financial crisis through some degree of stabilization by way of tepid growth," Lagarde stated at a public conference after the meeting.
WTO chief Lamy emphasized that trust in the eurozone hasn't yet been restored. A certain insecurity remains among heads of government and state in terms of determination in mastering the crisis, he said.
Lamy's suggestion for spurring global economic growth and employment was to expand free trade. This is especially important for Europe, he said, because in the next five years, 90 percent of global growth will be generated outside of Europe.
Industrialized nations should resist the temptation to turn to protectionism, Lamy thinks. Customs procedures should be simplified and harmonized, he said, as they can be particularly expensive.
Promoting free trade
Merkel acknowledged that Germany could improve its contribution to free trade. "We have difficulty in this regard, and Germany could achieve a lot here," Merkel said, pointing to the example of how the trade agreement with South Korea represents a big challenge for the German automotive industry.
"One has to push forward and say, yes, we'll embark on the endeavour of such a trade agreement, because it's better to promote free trade," Merkel said.
Jim Yong Kim, head of the World Bank, warned of broader consequences of the European debt crisis for developing countries. Despite carrying out at times difficult reforms in their own countries, this bloc has generated around 60 percent of global growth since 2008. Yet these countries are not out of danger, he said.
Lamy added that developing countries could lose up to 4 percent of their gross domestic product if the economic situation worsens. The scenario is made even more difficult by high grain prices in Africa and the Middle East as a consequence of the drought in the US and other regions in the world.
Trust in Europe
Such global problems and risks are increasing pressure on Europeans to get the debt crisis under control. After the meeting, Merkel said she feels quite responsible on this count.
"We should be clearer in saying where Europe is heading, where we can work more closely together, how can the processes really be improved for the 27 countries [of the European Union] and especially for the 17 euro states," Merkel said. Above all, credibility must be regained, she concluded.