World finance ministers said on Saturday that global economic growth had slowed and called for more effective measures to restore confidence.
“Global growth has decelerated and substantial uncertainties and downside risks remain,” they said on the final day of the annual meetings of the International Monetary Fund and World Bank in Tokyo.
“We need to act decisively to break negative feedback loops and restore the global economy to a path of strong, sustainable and balanced growth,” the IMF’s steering committee said.
“We are in a better position today regarding policy footing than 6 months ago,” said committee chair Tharman Shanmugaratnam, who is also Singapore’s deputy prime minister and finance minister.
“We are getting growth restarted and achieving fiscal consolidation, especially in advanced economies,” he said.
The committee also said that further steps, including a banking union, were needed to bring the eurozone banking crisis under control.
“In the euro area, significant progress has been made,” the committee said. “But further steps are necessary. We look forward to timely implementation of an effective banking and a stronger fiscal union to strengthen the monetary union’s resilience, and structural reforms to boost growth and employment at the national level.” U.S. Treasury Secretary Timothy Geithner echoed these observations.
“Europe has moved forward on a stronger firewall with key tools that provide breathing space to ensure sovereigns retain access to sustainable market financing as they undertake challenging reforms,” Geithner said in prepared remarks.
“Europe is also making progress on outlining a road map toward banking union, which is a critical step to ensuring a sustainable long-term framework” for addressing the crisis, Geithner said.
“However, what is important is how it will be applied in practice.” ECB chief Mario Draghi said it could take another year to implement reforms on supervising European Union banks.
“It is very important that we have this institutional step done by January 1,” Draghi said. “So we can prepare ourselves to run the supervision and make it operational. But this may well take another year. We think that by January 2014 the new framework will be in place and operational.” He added: “We have to move in time, but you have to do it well.” On Tuesday, the IMF cut its global growth forecast to 3.3 per cent for 2012 from a July projection of 3.5 per cent and to 3.6 per cent for 2013 from 3.9 per cent estimated three months ago. It warned that growth would be downgraded further if European and US policymakers fail to stem their economic crises.