The following are highlights of comments by finance ministers and central bankers in Washington this week for meetings of the Group of 20 and the semiannual meetings of the International Monetary Fund and World Bank.
IMF MANAGING DIRECTOR CHRISTINE LAGARDE:
There was a common recognition, a common diagnosis of what is happening at the moment and of shared sense of common purpose.
As far as the IMF is concerned, it is ready and it will deliver on any type of resources necessary and available to all its members. It is not just a euro area focused issue at the moment. There are other countries that are affected. It is a global occurrence. It just happens that the epicenter is in the euro area.
SINGAPOREAN FINANCE MINISTER AND IMFC CHAIRMAN THARMAN SHANMUGARATNAM
What we all felt was critical was the implementation of the euro zone July 21 agreement, which is going through a process of ratification. This was critical, in enhancing the size of the EFSF and increasing the flexibility so as to maximize its impact.
There was a willingness to see the IMF play a key role in handling the crisis and rekindling growth over the medium term. The IMF stands ready to provide stronger support where necessary.
There was very strong resolve that we will do what it takes to prevent an escalation of the financial crisis that we face in the weeks and months to come and that we will also do what it takes to avoid the prospect of a prolonged period of stagnation in the advanced economies and therefore a prolonged period of weakness in the global economy.
IMFC COMMUNIQUE ON GLOBAL ECONOMY, CRISIS
The global economy has entered a dangerous phase, calling for exceptional vigilance, coordination and readiness to take bold action from members and the IMF alike. We are encouraged by the determination of our euro-area colleagues to do what is needed to resolve the euro-area crisis.
IMFC COMMUNIQUE ON EURO ZONE, BANKS:
Euro-area countries will do whatever is necessary to resolve the euro area sovereign debt crisis and ensure the financial stability of the euro area as a whole and its member states.
...Advanced economies will ensure that banks have strong capital positions and access to adequate funding; maintain accommodative monetary policies as long as this is consistent with price stability, bearing in mind international spillovers; revive weak housing markets and repair household balance sheets; and undertake structural reforms to boost jobs and the medium-term growth potential of their economies.
IMFC COMMUNIQUE ON EMERGING MARKETS:
Emerging market and developing economies, which have displayed remarkable stability and growth, are also key to an effective global response....Surplus economies will continue to implement structural reforms to strengthen domestic demand, supported by continued efforts that achieve greater exchange rate flexibility.
GREEK FINANCE MINISTER EVANGELOS VENIZELOS
Greece is determined to honor all its obligations. No Greek paper will ever go uncovered.
ECB GOVERNING COUNCIL MEMBER ATHANASIOS ORPHANIDES ON POSSIBILITY OF GREEK DEFAULT
It is surreal that markets do expect a default. This cannot be, this cannot be! Such an event will only be forced by political forces, a political accident... This will actually be a catastrophic event and the Greek government is also realizing that. So if all the players involved want to avoid it, it is weird (that markets are expecting it).
BRAZIL FINANCE MINISTER MANTEGA ON CONFIDENCE IN EUROPEANS Speaking of European officials: They are strong and they can achieve the measures they are preparing, and I have a trust in what they are planning. Speaking of the European Central Bank: They have the instruments enough to give the answer to the European crisis.
DIRECTOR OF THE IMF ASIA AND PACIFIC DEPARTMENT ANOOP SINGH:
The challenge I think is to ensure overheating pressures are addressed. We see in Asia that the credit cycle is in a very advanced stage, even relative to other regions including Latin America. It's very important that this does not result in a decline in credit quality in the coming years. IMF MISSION CHIEF FOR CHINA, HONG KONG SAR NIGEL CHALK:
We have seen, in some of the larger cities in mainland China and Hong Kong itself, pretty high valuations on property particularly relative to income. That's clearly a risk for financial stability and a risk for macro stability. Keywords: G20/
ECB GOVERNING COUNCIL MEMBER AND CHAIRMAN OF THE FINANCIAL STABILITY BOARD MARIO DRAGHI:
ON DEBT CRISIS
Relevant governments must play their part, by acting forcefully to strengthen fiscal positions and bolster competitiveness through structural reforms within concrete timetables.
At the same time, the financial industry must continue to repair and strengthen balance sheets to rebuild resilience to shocks.
BANK OF CANADA GOVERNOR MARK CARNEY, SPEAKING TO CTV TELEVISION:
ON EFSF FIREPOWER
We've taken the view certainly that looking at what the Americans went through back in 2008/2009, that to get ahead of markets one needs to overwhelm the problem, and to overwhelm the problem one must use overwhelming fiscal power. And it may be that the fund put aside is not sufficient. It depends how it's leveraged, whether it's used as equity or debt. But our point with the Europeans, and others from outside Europe have made the point as well, (is) that they need to overwhelm this issue to get ahead of markets.
ECB GOVERNING COUNCIL MEMBER PATRICK HONOHAN:
ON LEVERAGING EFSF
If the pot of money put by governments on the table is to be leveraged, that is definitely a separate decision especially if that leverage is to involve a central bank.
We should not think of leveraging a public pot of funds as a free lunch.
ON USING EFSF TO RECAPITALIZE BANKS
The idea of injecting capital from the EFSF directly into banks is a very promising idea.
BRITAIN'S FINANCE MINISTER GEORGE OSBORNE:
In the eurozone, countries need urgently to implement the 21 July agreement, as the first step to resolving the sovereign debt crisis. Credible political commitments will be required in the immediate period ahead. However, it is clear that further action will be needed. The eurozone should follow the remorseless logic of monetary union through progress on institutional reform, greater fiscal integration and coordination of budget policies.
FRENCH FINANCE MINISTER FRANCOIS BAROIN:
ON THE IMF'S SDR
The internationalization of emerging market currencies is under way ... The Fund should be in a position to support this process, the final stage of which will be the inclusion of these currencies in the SDR basket. We should not disturb this process by adding extra conditions for currencies to join the SDR basket.
IMF ASIA AND PACIFIC DEPARTMENT DIRECTOR ANOOP SINGH:
ON CHINA AND STIMULUS
Our sense is that China has room to return to greater fiscal stimulus if needed. Our sense is that it will help them if this is done through consumption.
U.S. TREASURY SECRETARY TIMOTHY GEITHNER
ON RISKS TO GLOBAL ECONOMY
'Sovereign and banking stresses in Europe are the most serious risk now confronting the world economy. The commitments that euro area members have made to one another in the last 18 months have been impressive. But further action to expand the effective capacity of these commitments is still necessary to create a firewall against further contagion.
ON NEED TO WORK WITH ECB
Meanwhile, European governments should work alongside the European Central Bank to demonstrate an unequivocal commitment to ensure sovereigns with sound fiscal policies have affordable financing, and to ensure that European banks have recourse to adequate capital and funding to win the full confidence of their depositors and creditors.
ON THE THREAT OF DEFAULT, BANK RUNS
The threat of cascading default, bank runs, and catastrophic risk must be taken off the table, as otherwise it will undermine all other efforts, both within Europe and globally. Decisions as to how to conclusively address the region's problems cannot wait until the crisis gets more severe.
ON FISCAL POLICY
Without additional near-term support, fiscal policy in the U.S. will be overly contractionary and the U.S. economy will likely grow below its potential in 2012.
ON MONETARY POLICY
As for monetary policy, inflation risks are on average, though not everywhere, less acute. This means some central banks will continue to ease policy, while some will keep rates lower longer and slow the pace of expected tightening.
ON THE IMF'S SHORTCOMINGS
But the Fund still falls short in assessing exchange rate policies. The Fund's surveillance would benefit from the publication of an External Stability Report that provides a frank assessment of exchange rate misalignment and excessive reserves accumulation and progress being made in reducing global imbalances. We call on the IMF to set forth a strong and comprehensive set of proposals to address these deficiencies.
CANADIAN FINANCE MINISTER FLAHERTY ON REFORM OF INTERNATIONAL MONETARY SYSTEM
While much work has been devoted to strengthening the IMS over the last year, the system will not work properly so long as the global economy's ability to adjust to shocks remains impaired by exchange rate regimes that frustrate adjustment.
Canada supports ongoing discussions at the IMF and in the G20 on the possible expansion of the Special Drawing Right basket of currencies. The current criteria are appropriate and a high bar for entry should be maintained.
PEOPLE'S BANK OF CHINA GOVERNOR ZHOU XIAOCHUAN
ON EURO AREA CRISIS:
The sovereign debt crisis must be resolved promptly to stabilize market confidence, and forceful and credible fiscal consolidation measures are needed in relevant economies to alleviate sovereign debt stress.
ON GLOBAL COOPERATION:
Major economies need to promptly introduce clear and credible medium-term adjustment strategies to break the negative feedback loop between public sector and private financial institutions, boost market confidence, and guard against protectionism.
ON CHINA'S ECONOMY:
China's growth outlook remains positive. High inflation remains the top concern.
More flexible measures will be taken in response to unpredictable changes in the world economic and financial developments.
ON INTERNATIONAL RESERVE CURRENCY SYSTEM:
Efforts should be made to promote a diversified international reserve currency system.
A greater role of the SDR should be explored to improve global liquidity supply.
U.S. TREASURY SECRETARY TIMOTHY GEITHNER, ON BBC RADIO:
ON EUROPE'S DEBT SITUATION
All of us who look at Europe going through this have to have admiration for what they are trying to do and recognize the difficulty of it but also help them understand that markets are moving much more quickly than they are moving, and these things have the classic dynamic that the longer you wait the harder it is to solve, the more expensive it is to solve, and there is a huge premium on early action.
ON SHORTCOMINGS IN EUROPE'S EFFORTS TO DATE
I think a necessary condition for confidence is to see governments and the central bank, particularly, working alongside each other, not at crossroads, and the absence of that has undermined what they've been trying to build in that context.
ON THE NEED FOR GOVERNMENTS AND THE ECB TO SHARE ACTIONS
What we did in the United States ... not right away, it took us a bit of time but we got a framework in place where we worked very carefully alongside the central bank and (made) sure that the fiscal authorities were absorbing the risk in the central bank's actions, so that they were free to help resolve our crisis without calling into question their core basic mandate.
NIGERIAN FINANCE MINISTER NGOZI OKONJO-IWEALA:
While growth (in Sub-Saharan Africa) has remained robust, some vulnerability exists. Many LICs remain vulnerable to the resurgence of the global fuel and food price increases which is slowing down rebuilding of fiscal buffers as a result of pressures to protect social spending.
LICs also face inadequate financing of priority development projects in the face of possible decline in aid flows as well as slow recovery in exports with the persistent slow recovery in advanced economies.