WASHINGTON – Finance ministers from the world’s largest economies said Friday they are determined to prevent a slide into another global recession, but a top U.S. official expressed frustration that a number of major economies were not doing enough to bolster growth.
After two days of discussions, finance officials from the Group of 20 nations unveiled plans for a global initiative to build roads and other infrastructure projects to help boost world growth by $2 trillion over the next five years and create millions of jobs.
But officials conceded that this longer-run effort will not help with the pressing problems of weak growth in Europe and a number of other parts of the world. And U.S. Treasury Secretary Jacob Lew complained that governments in Europe, Japan and China were failing to deliver needed support.
“European leaders should focus on recalibrating policies to address persistent demand weaknesses,” Lew said in comments prepared for a session of the policy-setting committee of the International Monetary Fund.
Weak reports on industrial production and trade out of Germany, Europe’s largest economy, jolted financial markets and raised worries that Europe could be headed for another recession. U.S. stocks endured their worst week since May 2012 with the losses continuing on Friday when the Dow Jones industrial average slid 115 points.
It was against this backdrop that G-20 finance ministers and central bank presidents met for two days of talks that wrapped up Friday in advance of the annual meetings of the 188-nation IMF and its sister lending institution, the World Bank.
Lew did not mention Germany by name, but it was clear that his remarks on Europe focused on that nation’s reluctance to do more to stimulate growth. He said that “countries with external surpluses and fiscal flexibility” needed to bolster their efforts to promote stronger growth. Germany, Europe’s largest economy, ran a large trade surplus last year.
Lew said economic risks in China had risen and that country had ample resources to adjust its policies to support domestic-led growth. He described Japan’s prospects as uncertain “with growth projected to remain weak this year and next” and said Japanese officials needed to move “decisively” to implement needed structural reforms in its economy.
Speaking at a news conference, Japanese Finance Minister Taro Aso said Japan’s economy, the world’s third largest, was not weakening even though growth had slowed in the April-June quarter. “We are still on the track to recovery” and the nation was starting to emerge from its prolonged period of deflation, he said.
The G-20 group is led this year by Australia, which will host a leader’s summit next month in Brisbane. Australian Treasurer Joe Hockey, who chaired the finance discussions, told reporters that the plan the G-20 group has developed involved more than 900 individual projects with the potential to lift growth by 1.8 per cent over the next five years. He said all the details would be revealed at the leaders’ summit.
While developing the five-year plan for infrastructure projects, the G-20 finance officials were less successful in their efforts to deal with the immediate threats from the slowdowns in Europe, Latin America and China. The group did not issue a communique, but individual finance ministers said the economic problems were discussed in the sessions.
“We as a group do not want to settle for mediocre growth,” Canadian Finance Minister Joe Oliver told reporters after the G-20 discussions ended Friday. “We don’t think we have to.”
IMF Managing Director Christine Lagarde said that while the problems facing the global economy were well-known “action in the past has lacked. This time the challenge is for real. We must aim higher, try harder and work better together to achieve higher growth outcomes.”
In addition to the dangers of weak growth, the finance officials also addressed a growing health crisis from the Ebola virus.
In his remarks to the finance officials, World Bank President Jim Yong Kim, an infectious diseases and public health expert, called for the creation of a new pandemic emergency facility that would rapidly respond to future health emergencies by delivering money to countries in crisis.
“Even as we focus intensely on the emergency response(to Ebola), we must also plan for the next epidemic, which could spread more quickly, kill even more people and potentially devastate the global economy,” Kim said.
Both the policy-setting committees of the bank and the IMF were expected to address the Ebola crisis at their meetings on Saturday.
Officials also addressed their on-going efforts to strengthen financial regulation to prevent a repeat of the 2008 financial crisis, the worst disruption of the banking system since the 1930s.
Treasury officials said that on Monday Lew and Federal Reserve Chair Janet Yellen would join British Chancellor of the Exchequer George Osborne and Bank of England Governor Mark Carney in a joint exercise to determine how banking authorities in both countries would handle the failure of a large multinational bank.
Associated Press writers Matthew Pennington and Harry Dunphy contributed to this report.