Smaller countries pledge support
Leaders from the world’s smaller, less-developed countries joined Saturday in pledging to support efforts by the United States and other major nations to halt the global financial crisis, despite worries that their own economies may suffer.
The pledge, by member countries of the International Monetary Fund, amounted to the latest recognition that the economic crisis has proved so broad and powerful that almost no nation has been immune to its damaging effects -- making it more and more difficult, and possibly unwise, to try to go it alone or act unilaterally.
In essence, the International Monetary Fund turned a previously scheduled annual conference into a kind of emergency global financial summit, since the organization includes virtually every country in the world.
While the major developed nations in the IMF were expected to support such a move, what was significant was that at the end of a long day, the weaker, more vulnerable members joined in a “strong endorsement” of the rescue approach outlined a day earlier by seven of the world’s largest economies.
“This is a commitment by the international community that because this crisis is global, the solution has to be global,” said IMF conference chairman Youssef Boutros-Ghali. “And it has to have the support of the entire financial community -- developed and developing countries.”
IMF officials said the fund would financially support any country that is adversely affected by the crisis.
Shortly after the IMF meeting, President Bush made an unscheduled appearance at a meeting of the world’s most robust economies, the so-called G-20 nations that include high-growth countries such as China and Brazil in addition to the G-7.
“It doesn’t matter if you’re a rich country or a poor country, a developed country or a developing country: We’re all in this together,” Bush told the G-20 finance officials, who gathered on the sidelines of the IMF conference to discuss the crisis, largely at the request of the United States.
“We must work collaboratively. We take this seriously, and we want to work with you,” the president told the officials, White House spokesman Tony Fratto said.
European leaders are convening their own emergency meeting in Paris today to coordinate actions by banks in the 15 countries that use the euro. European countries initially squabbled over their responses to the crisis, but as it has escalated, their differences appear to be evaporating.
“This is not a small crisis that [a country] can inflate its way out of or wiggle its way out of. This is a systemic crisis,” Boutros-Ghali said.
Washington has hosted a series of rolling finance meetings that started under different auspices on Friday -- some at the IMF, some at the World Bank and others under the umbrella of the G-7 or G-20. The sessions continue through the weekend.
A consensus seems to be emerging among participating officials that, whatever economic or political differences may exist among them, all of the countries must act aggressively and in concert on at least two key points: guaranteeing deposits in their banks and pumping government capital into faltering institutions.
Bush told the G-20 officials that the time may come for figuring out who is to blame, but the focus now should be on resolving the crisis.
On Friday, the G-7 countries -- the United States, Canada, Britain, Japan, France, Germany and Italy -- failed to draw up a precise action plan, but they did issue a set of five principles that countries should follow in developing their own policies.
Those principles included a commitment to “take decisive action and use all available tools to support systemically important financial institutions and prevent their failure.” Among the steps countries should take, the statement said, is ensuring that banks have adequate capital and that bank deposit insurance programs are “robust.”
IMF managing director Dominique Strauss-Kahn said the joint principles enshrine the idea that countries should set aside narrower national interests in the service of broader, global financial stability.
“Banks needing to be recapitalized will be recapitalized,” he said.
Developing countries have expressed concerns about the massive number of government resources pouring into the financial centers of already wealthy countries. If the world enters a recession, they argue, their populations are the most vulnerable to higher prices for such necessities as food and fuel.
At the White House early in the day, Bush exhorted countries to act in concert or risk greater damage.
“We must ensure the actions of one country does not contradict or undermine the actions of another,” Bush said in the White House Rose Garden, flanked by G-7 finance ministers. “In our interconnected world, no nation will gain by driving down the fortunes of another. We’re in this together. We will come through it together.”
Stock markets around the world have been extremely volatile even though the United States and other governments have unveiled a series of extraordinary programs designed to restore confidence to the credit markets.
The Dow Jones industrials fell 18.2% last week, the worst one-week percentage decline in the index’s 112-year history.
“There have been moments of crisis in the past when powerful nations turned their energies against each other, or sought to wall themselves off from the world,” Bush said. “This time is different.”