G-7 Responds to Looming Global Economic Crisis
On Sunday August 7, members of the Group of Seven (G-7) held a conference call to discuss the global economic situation and how to avoid a global recession.
The central banks representatives failed to form a cohesive action plan, yet each bank expressed a separate plan to fight the instability.
G-7 consists of the finance ministers of Canada, France, Germany, the United States, Italy, Japan, and the United Kingdom. In addition, the chairman of the European Central Bank attended the conference call.
Problems persist across the board, and the nations have discussed their individual plans for reversal of the economic downturn.
As the representatives stated publicly, they plan to “take all necessary measures to support financial stability and growth in a spirit of close cooperation and confidence.”
The European Central Bank (ECB) has reinitiated its bond buying program and enlarged it to include the declining economies of Italy and Spain, a plan which was met with opposition by some including Germany’s Bundesbank.
The opposition fears that including even more nations in this program would stir up belief that the ECB is, as Bloomberg reports, “breaching a key principle in the euro’s founding treaty and undermining its credibility.”
And yet the ECB will go ahead with the plan in order to prevent the euro from utterly crumbling.
Bank of England governor Mervyn King is concerned about the nation’s economic outlook and has indicated a preparation for additional stimulus if it is required.
Japan has actively devalued the yen, which had sparked concern over its value in relation to other currencies, and Switzerland is now facing a similar fear with the franc as investors are turning to the Swiss currency in the midst of fears of the deteriorating euro.
Switzerland has called the franc “overvalued”, and is looking to circulate more francs into the economy to counter this.
Amid all this, U.S. Federal Reserve chairman Ben S. Bernanke has indicated that a third round of quantitative easing is not ruled out, reports Bloomberg.
This has stirred up opposition, especially due to the fact that the first two rounds failed to sufficiently stimulate the economy as they were meant to.
The Fed is also maintaining interest rates at close to zero until at least 2013.
Stocks are down in the U.S. and other nations out of fear that a global recession is looming.
Though the action plans by G-7 were not united, each is still firm in turning around the current economic situation.+7
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