Top Financiers Urge Action

In an implicit recognition that the global economic weakening goes beyond the potential impact of the Iraq war, the Institute of International Finance urges finance ministers to take co-ordinated action to reduce the pressure at next week's IMF meeting. Of course urging coordinated action is one thing, achieving consensus in this charged atmosphere may be another. The IIF is right though, the situation in March deteriorated significantly, and if this line continues Stephen Roach will get his double dip, the only real debate will be whether this counts as a continuation of the previous recession or a new one!!

The world's top economic policymakers should promise now to take swift and concerted action - such as cutting interest rates - if the global economy weakens further, the leading association of financial institutions said on Tuesday. The warning from the Institute of International Finance, a private sector body representing banks, fund managers and finance houses, came as a run of poor figures showed weakening confidence across the world's large economies in the period before the war with Iraq.The IIF, issuing its advice to ministers before next week's meetings of the International Monetary Fund, said the economic fragility went beyond the transitory effect of the war.

"It would be unfortunate if ministers came to Washington believing that an early end to the war would remove the need for action," said Charles Dallara, the IIF's managing director.The Group of Seven rich countries has shied away from promising a collective plan to cope with economic weakness, saying each central bank and finance ministry should concentrate on its own economy. But the IIF said challenging times called for extraordinary measures."There is value sometimes in the demonstration effect of co-operative and co-ordinated action," Mr Dallara said. The G7 should announce a bias towards monetary easing underpinned by a joint commitment to act if necessary and to flexible short-term management of fiscal policy, he said.Global financial markets appeared slightly stronger on Tuesday, with most stock markets and long-term interest rates pulling back a little from recent falls. But surveys from the US, the eurozone and the UK confirmed that business and consumer confidence had been badly dented in the run-up to the war.The widely watched Institute of Supply Management survey suggested that US manufacturing stalled in March, when its activity index fell to its lowest since the aftermath of the September 2001 terrorist attacks. The slide to 46.2 in March from 50.5 in February was sharper than most economists had expected.The Reuters/NTC purchasing managers' survey for eurozone manufacturers showed the index sliding by a higher-than- expected 1.7 points to 48.4. In France, the Insee survey of household confidence in March showed consumers at their gloomiest since 1996, when the country was disrupted by public sector strikes. In the UK, the regular Reuters purchasing managers' survey suggested the sector was beginning to contract again.
Source: Financial Times
LINK