G-20 finance chiefs split over ways to revive world economy
Global finance chiefs split over how best to revive the world economy, risking disappointment for investors seeking a coordinated campaign. Differences were laid bare on Friday as central bankers and finance ministers from the Group of 20 developed and emerging markets gathered for talks in Shanghai.
Calls for increased government spending to lift demand, which have emanated from the U.S. and China, ran into opposition from German Finance Minister Wolfgang Schaeuble, who said using debt to fund growth just leads to "zombifying" economies. Bank of England Governor Mark Carney voiced skepticism over negative interest rates, which have now been adopted in continental Europe and Japan, and the head of the International Monetary Fund also warned about diminishing effectiveness of monetary policies. While Japan's finance minister said the G-20 will reaffirm a pledge to avoid competitive devaluations, the lack of agreement on fiscal or monetary initiatives from the group risks disappointing investors who have urged some coordinated action to address stock declines and weak prospects for growth. Offering some solace was clear signals from China that the host nation will implement fiscal and monetary easing.
"The chances of the G-20 agreeing to anything specific, and us being able to report on more than an eloquent statement on Monday are extremely slim," wrote Esther Reichelt, a foreignexchange strategist at Commerzbank AG in Frankfurt.
The G-20 meet over dinner Friday, with a communique expected at the conclusion of sessions on Saturday. Stocks in Asia rose after Chinese central bank Governor Zhou Xiaochuan said in Shanghai that his country has room for further monetary actions if needed. Finance Minister Lou Jiwei said China also has room to loosen fiscal policy.