Further efforts by Europe are indispensable if it is to contain its debt crisis. Japan, the United States and emerging economies took this stern position vis-a-vis Europe during the latest meeting of the Group of 20 economic powers.
The G20 meeting, which ended Sunday in Mexico after adopting a joint statement, was participated in by finance ministers and central bank governors of the 20 major economies, including Japan, the United States and the European Union plus China and Brazil.
The focal point was how to bolster the International Monetary Fund’s crisis war chest, but a conclusion was postponed until a G20 financial ministers meeting scheduled for April.
The communique pointed out that eurozone countries “will reassess the strength of their support facilities in March” and “this will provide an essential input in our ongoing consideration to mobilize resources to the IMF.” It was significant that the G20 pressed Europe to bolster its own financial safety net before strengthening the IMF’s financial resources.
The eurozone’s emergency financial resources stand at no more than 500 billion euros (about 55 trillion yen), comprising those of the European Financial Stability Facility and the European Stability Mechanism.
A plan is emerging in Europe to expand these firewall funds, but its materialization faces rough going. Germany, which is concerned it may have to bear an additional financial burden, takes a cautious view of the plan. The plan is also overshadowed by differences between two key assistance countries ― Germany and France ― and aid recipient countries, including Greece.
The EU will hold a meeting of top leaders of its member nations in early March. Will they be able to produce financial expansion measures that can win over the G-20? Its unity is being put to the test.
The IMF is studying expansion of its financial capability by 500 $billion (about 40 trillion yen) and is asking Japan, the United States and China, among others, to provide funds.
Tokyo and Beijing are studying the IMF’s request, but Washington takes a wary view of the financial assistance mechanism and the provision of additional funds. It remains cautious because such plans are unlikely to be approved by Congress under current fiscal restraints and because it does not want to see China increase its voice in the IMF.
Europe hopes to get through the crisis with the IMF’s assistance. To this end, it must work out its own additional financial measures.
The EU and other concerned European organizations last week decided on a second bailout for Greece, the nation that triggered the European debt crisis. This makes it likely that Greece will avoid default. But credit uncertainty is expected to smolder.
The communique warned that “downside risks continue to be high.” It is quite natural for the statement to issue such an alert.
As a new headache for the world economy, the joint statement pointed out the risks of crude oil prices, which have been surging above $100 per barrel due to the heightened tension over Iranian affairs and global monetary easing.
Higher crude oil prices impose a heavy burden on the Japanese economy, which has yet to begin a full recovery.
The G20 needs to ask oil-producing countries to ensure a stable supply while continuing its efforts to bolster price monitoring capabilities.
(The Yomiuri Shimbun)
(Asian News Network)
