Washington: The world’s financial leaders see a number of threats facing a global economy still on an uneven road to recovery with US and European officials worrying that Greece will default on its debt.
The finance ministers and central bank governors ended three days of meetings in Washington determined to work toward “a more robust, balanced and job-rich economy” while admitting there are risks in reaching that objective, the steering committee of the International Monetary Fund said in its communique on Saturday.
Seeking to resolve Athens’ debt crisis, Greek Finance Minister Yanis Varoufakis held a series of talks with other finance officials on the sidelines of the meetings. The focus now shifts to Riga, Latvia, where European Union finance ministers meet next week.
The head of the European Central Bank, Mario Draghi, said it was “urgent” to resolve the current dispute between Greece and its creditors. He said that while the international finance system had been strengthened since the 2008 crisis, a Greek default would still put the global economy into “unchartered waters” with its effect hard to estimate.
Draghi told reporters he did not want to even contemplate the chance of a Greek default on its debt. But French Finance Minister Michel Sapin said he thought any damage would be confined to Greece because Eurozone countries had established measures to protect themselves from any spillover effects.
Seeking to assure financial markets, which fluctuated considerably on Friday over the possibility of a Greek default, Sapin said nothing had changed on the issue as a result of the weekend meetings. He said it was up to the Greek government to present credible, assessable solutions to its economic problems.
“The solution to the Greek debt crisis is in Greece,” he said.
The head of the IMF, Christine Lagarde, who had rejected suggestions that the IMF might delay Greek debt repayments, said she had constructive talks with Varoufakis and that the objective remained the same: to restore stability for Greek finances and assure an economic recovery.
Greece is negotiating with the IMF and European authorities to receive the final 7.2 billion euro (Dh28.5 billion) instalment of its financial bailout. Creditors are demanding that Greece produce a credible overhaul before releasing the money.
The country has relied on international loans since 2010. Without more bailout money Greece could miss payments due to the IMF in May and run out of cash to pay salaries and pensions.
The negotiations over Greece’s debt have proved contentious, but all sides have expressed optimism that the differences can be resolved.
A number of countries directed criticism toward the US for the failure of Congress to pass legislation needed to put into effect reforms that would boost the agency’s capacity to make loans and increase the voting power of such emerging economic powers as China, Brazil and India.
Agustin Carstens, the head of Mexico’s central bank and chair of the IMF policy panel, said “pretty much all of the members expressed deep disappointment” that a failure of Congress to act is blocking implementation of the reforms. The IMF panel directed IMF officials to explore whether interim solutions could be put in place until Congress acts.
The finance ministers urged central banks including the US Federal Reserve to clearly communicate future policy changes to avoid triggering unwanted turbulence in financial markets.
The annual meetings of the IMF and its sister organisation, the World Bank, take place on October 9-10 in Lima, Peru.
