Global economy in 'critical phase,' IMF official says : LUSENET : Grassroots Information Coordination Center (GICC) : One Thread,2107,500476233-500731455-504171985-0,00.html

Global economy in 'critical phase,' IMF official says

By MARTIN CRUTSINGER, Associated Press

WASHINGTON (April 24, 2001 7:40 p.m. EDT) - The U.S. economy's dramatic slowdown means the world's economy has entered a "critical phase" where policy coordination between nations will be more important, the head of the International Monetary Fund said Tuesday.

Managing Director Horst Koehler said a key issue for the spring meetings of the 183-nation IMF and its sister lending agency, the World Bank, will be to demonstrate that growth-oriented policies are being pursued in the major industrial countries as well as developing nations.

"I have no doubt that with the right policy response the global economy will recover in the latter part of this year," Koehler said in an interview with a small group of reporters.

The IMF has reduced its forecast for this year based on the fact that growth in the United States, the world's biggest economy, has slowed so sharply. This has raised fears that a U.S. recession could end a record 10-year long economic expansion.

"It must be the objective of this meeting and beyond this meeting to keep the global economy on track," Koehler said. He said without a growth strategy in place, it will be "much more difficult for countries like Indonesia, like Turkey and Argentina to come out of the mess."

The IMF is considering requests for emergency loans to help those three nations stabilize economies that are currently in turmoil.

Koehler said he believed it was important not to become overly pessimistic.

"We feel it's appropriate not to paint everything in negative terms," Koehler said. He noted that while overall economic growth has slowed in the United States, consumer spending, including demand for autos and houses, has held up reasonably well.

Koehler praised the decision by the Federal Reserve to aggressively cut U.S. interest rates beginning in January and supported President Bush's effort to cut taxes. He said such a reduction should "build confidence with consumers."

Koehler was critical, however, of the action by the European Central Bank, which earlier this month declined to cut interest rates for the 12 European nations that share a common currency, the euro. ECB President Wim Duisenberg had argued that it was too soon to cut European interest rates because that region is not threatened with a recession.

Koehler also said he believed authorities in Japan, which is going through another change in prime ministers, will have to be much more forceful in overhauling its troubled banking sector in order to return the world's second largest economy to sustained growth.

Last week, U.S. Treasury Secretary Paul O'Neill said the Bush administration recognized the importance of the IMF, but he said there was a need to devote more efforts to preventing financial crises before they occur.

Koehler said he had established a good working relationship with O'Neill and he believed that the new Bush team was learning that the IMF began a number of changes in response to criticism of its handling of the 1997-98 Asian crisis.

-- Helium (, April 24, 2001


Hello, Helium, nice to see you hear. I look forward to the great resources you bring to this board.

-- Rachel Gibson (, April 25, 2001.

Oops! "...and 'here'" It's late, even in MDT.

-- Rachel Gibson (, April 25, 2001.

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