January 20, 2022

G-8 Nations Pledge New Aid to Arab Spring Economies

MARSEILLE, France — With economies crumbling in the countries that touched off the Arab Spring, leaders of the Group of 8 industrialized nations on Saturday pledged $38 billion in new aid to help underpin the region’s transition to democracy, amid complaints that hardly any money from a $20 billion aid package promised in May has materialized.

In a statement following hours of meetings that included officials from Kuwait, Qatar, Saudi Arabia, Turkey and the United Arab Emirates, the G-8 acknowledged that the uprisings that swept the region were now giving way to social pressures that needed to be urgently addressed, particularly among the rising ranks of unemployed young people.

“The immediate challenge for these countries is to fulfill people’s expectations while preserving macroeconomic stability,” the group said, pointing to increasingly strained public finances and a surge in the price of food, gas and other raw materials as a source of discontent.

In a bid to bring all countries moving toward democracy in the region under its umbrella, the G-8 also had Libya sit at the table for the first time. Representatives of the Libyan national transition council participated in the discussions, and a new government would eventually receive aid to help stabilize the nation’s economy, the French finance minister, François Baroin, said.

Libya was also admitted as a member of the International Monetary Fund after its board recognized the transition council as the nation’s new government, the managing director, Christine Lagarde, said. “Libya is now formally represented at the I.M.F.,” she said. “The fund will be able to help Libya with technical assistance, contribute to its macroeconomic framework or give loans and support as needed.”

The I.M.F. will send a team to Libya “as soon as security is appropriate,” she added.

Despite those efforts, delays in delivering some $20 billion in aid that the Group of 8 pledged to Egypt and Tunisia in May could itself complicate the transition to democracy. At the time, officials compared the uprisings to the fall of the Berlin Wall, and said that Western leaders’ main aim was to ensure that instability did not undermine the process of political reform.

But four months later, Tunisia has not received any of the money promised, Jalloul Ayed, the country’s finance minister, told The Financial Times this week. Egypt has received only $500 million, that nation’s finance minister told the paper. Neither minister commented during the G-8 meetings.

The economic challenge has grown particularly severe in Egypt since the fall of President Hosni Mubarak. Revenue from tourism, a pillar of the economy, has plunged, while foreign investment has virtually dried up.

Tunisia has been plagued by similar problems since an uprising in January forced President Zine el-Abidine Ben Ali to leave the country. Mr. Ayed, the finance minister, said earlier this month that the economy would grow only about 1 percent this year, compared with an estimated 3.7 percent last year.

Mr. Baroin did not address the suggestion that the G-8’s pledges were more talk than action, except to say that the various mechanisms for disbursement take time. He offered few specifics, but said the pledge for a fresh $38 billion in financial assistance — this time also including Jordan and Morocco as well as Egypt and Tunisia — would take the form of loans, bilateral aid and debt forgiveness from countries and a slew of multinational financial institutions.

These funds — should they come — would be channeled mainly toward job creation for young people in the Middle East and North Africa, who have watched dreams of new opportunities dry up following the uprisings.

The European Bank for Reconstruction and Development will expand its current role of lending to former Communist countries and start actively participating in lending to Arab countries trying to establish democracies.

Article source: http://feeds.nytimes.com/click.phdo?i=cea0aa35ded7d1e587c62de5e9d1e17a

G-7 Faces Calls for Urgent Action to Spur Growth

MARSEILLE, FRANCE — With the prospect of a drawn-out recession in the United States and Europe, officials of the Group of 7 industrialized nations faced calls Friday to act urgently to stimulate growth, even at the risk of running up deficits that have brought some countries under pressure in global financial markets.

A day after President Barack Obama pressed the Congress to enact a $447 billion package of tax cuts and new government spending to try to create jobs in the United States, Treasury Secretary Timothy Geithner insisted that such an economic stimulus would reduce the odds of America slipping into a double-dip recession.

But he warned that headwinds from Europe’s deepening debt crisis risked hitting the United States at a time when it is still weak. In remarks that indicated Washington considers Europe’s problems to be a major threat, he admonished European leaders in a letter published in the Financial Times to take “more forceful action” to show they are committed to resolving their problems.

“Europe is still under enormous pressure,” Mr. Geithner said in an interview at the G-7 with Bloomberg Television. The crisis on the continent has been a “significant” factor in the U.S. slowdown, he added.

Concerns about Europe’s ability to contain the crisis deepened Friday when Jürgen Stark, a German who sits on the executive board of the European Central Bank and has opposed the bank policy of buying bonds from Greece and other troubled countries to support them, abruptly announced his resignation. European and U.S. stocks were off sharply Friday and the euro lost more than 2 cents against the dollar.

Europe’s leaders have struggled to prevent a crisis that started in Greece nearly two years ago from contaminating larger countries like Italy and Spain, as worries about high debt and deficit levels, and the health of European banks that hold the bonds of governments hit by the crisis, spread. Even France — which, together with Germany is footing most of the bill for the crisis — has came under attack as investors grow more nervous about the state of its banks.

Of course, the United States is not blameless. As the world’s largest economy, its slowdown, ignited by the global financial crisis that blew up on Wall Street in 2008, has ricocheted through other economies, none of which has ever really recovered since then.

The downgrade to the United States’s AAA rating by Standard and Poor’s ratings agency last month also did more damage to financial companies than initially thought, for instance by forcing banks to re-price the risks of what was once considered a totally risk-free asset — U.S. Treasury securities.

That event sparked particular angst in China, the world’s largest holder of U.S. Treasuries. Although China is one of the few locomotives of global growth, Beijing is facing the twin danger of seeing its two largest customers — the United States and Europe — slowing simultaneously while it struggles to encourage growth in its own domestic demand.

China has already stepped in, albeit mildly, to help support the euro by buying the debt of Spain and Greece, two of the countries hit hardest by the crisis.

Premier Wen Jiabao and other senior Chinese officials have talked for many months about their intention to buy more euro-denominated bonds with the country’s $3.2 trillion in foreign exchange reserves, portraying this as a way to cement ties to Europe.

But bankers and economists say that while China wants to be helpful and appears to have poured tens of billions of dollars worth of foreign reserves into euro-denominated investments already this year, Chinese officials are still cautious about taking big risks with the country’s nest egg.

Washington is also ready to help ensure that Europe’s problems do not taint the United States, Mr. Geithner said. But he did not specify how, other than allowing that he is in regular consultation with his European counterparts.

“What well see in coming months is the Americans and Asians will become more open in their expression of concern about way the Europeans are handling the crisis, because unless they do address key problems, including the banks, there is a risk this is going to trigger a Lehman 2,” said Simon Tilford, the chief economist of the Center for European Reform in London. “So far they have kept their counsel publicly. But now they recognize Europe’s strategy is not working, and they are starting to panic.”

The G-7 ministers themselves, however, were not expected to announce any coordinated action or new initiatives to shore up growth in the advanced world, which the Organization for Economic Cooperation and Development Economic said Thursday is near stagnation and set to remain limp through the rest of the year, although a downturn on the scale of the last one appears unlikely.

Christine Lagarde, the chief of the International Monetary Fund, also urged Europe’s policymakers Friday to take bold and unified action to see the global economy through what she described as a “dangerous phase.”

In a speech delivered in London before she headed to join G-7 finance ministers under a blazing sun at the Palais du Pharon, a Napoleonic-era building perched by the azure waters of Marseille’s Vieux Port, Ms. Lagarde emphasized that governments with surpluses or the flexibility to use more direct fiscal action should do so.

The world is “collectively suffering from a crisis of confidence in the face of a deteriorating economic outlook,” she said. “Countries must act now and act boldly to steer their economies through this dangerous phase of the recovery.”

Ms. Lagarde also reiterated the fund’s concern about the health of Europe’s banks. Much to the irritation of European Union officials, she recently suggested that the euro zone’s bailout fund should be used to provide a big injection of capital into European banks.

On Friday, she did not back away from that position. “Some banks need additional capital,” she said, warning of the possibility of “a debilitating liquidity crisis.”

Keith Bradsher contributed reporting from Hong Kong and Landon Thomas Jr. from London.

Article source: http://www.nytimes.com/2011/09/10/business/global/g-7-faces-calls-for-urgent-action-to-spur-growth.html?partner=rss&emc=rss