By Arun Kumar, IANS,
Washington : US President Barack Obama has urged the world’s top 20 economies to work together to boost reforms and take aggressive actions to repair the worst global financial crisis since the 1930s.
In a letter released Friday ahead of the June 26-27 G-20 summit in Toronto, Obama told the leaders of the world’s top economies including India, China and Russia: “Our highest priority in Toronto should be to safeguard and strengthen the recovery.”
“Together we designated the G20 as the premier forum for international economic cooperation,” he wrote reminding the leaders of their key role.
“It is important that the G20 demonstrates its continued determination to work collectively to address the renewed challenges facing the global economy.”
He also called for a commitment to “sustainable” public finances saying he was “concerned by weak private sector demand and continued heavy reliance on exports by some countries with already large external surpluses. ”
“We need to commit to restore sustainable public finances in the medium term. And we should complete the work of financial repair and reform. Obama said in his letter.
Obama’s call for financial stimulus to restore economy in “the medium term” comes at a time when many European nations are cutting spending in order to reduce budget deficits.
“Resolving ongoing uncertainty about the transparency of bank balance sheets and the adequacy of bank capital, particularly in Europe, will help reduce financial market volatility and the cost of borrowing,” he said.
“I also want to underscore that market-determined exchange rates are essential to global economic vitality. The signals that flexible exchange rates send are necessary to support a strong and balanced global economy,” said Obama without specifically mentioning China.
Economists worldwide have criticised China for running huge surpluses, a consequence of China’s rigid exchange rate.
“We worked exceptionally hard to restore growth; we cannot falter or lose strength now,” Obama said describing it as “a time of renewed challenge to the global economy”.
“To support the recovery and strengthen the ability of our financial systems to deliver needed credit, we must maintain the momentum of financial repair,” he said offering an action plan of issues.
Obama’s prescription included stricter capital requirements and derivatives oversight, increased transparency and disclosure and a mechanism for winding down global financial firms.
(Arun Kumar can be contacted at [email protected])