Leading policymakers were unusually candid on Friday in voicing fears that the euro zone’s financial and banking woes could derail the global economic recovery.
The troubles of Greece and other heavily indebted European governments dominated conversations ahead of a meeting of finance ministers and central bankers of the Group of 20 of the world’s top developed and emerging economies, Canadian Finance Minister Jim Flaherty said.
“It is essential to ensure continued recovery that Europe fix its banks. It is essential that certain vulnerable European nations follow through with major fiscal consolidation, and get the job done,” Flaherty told reporters.
Gatherings such as the G20 are typically an opportunity for officials to radiate confidence, especially when financial markets are in a nervous state, as they are now.
But Flaherty was not alone in his warnings. “We can’t afford to be complacent,” South Korean Finance Minister Yoon Jeung-hyun told the opening session.
“Without further and ongoing action from us, the recovery may not remain on track and we may not be able to achieve strong, sustainable and balanced growth,” he said.
South African Planning Minister Trevor Manuel said he could not think of a more challenging time than the present for the Group of 20. Decisions needed taking, he said, to banish the spectre of a double-dip recession.
“It’s important that we all understand just how fragile the recovery is,” Manuel, himself a former finance minister, said.
“Just when we thought we had turned the corner there are clouds on the horizon,” World Bank managing director Ngozi Okonjo-Iweala said.
But US treasury secretary Timothy Geithner sounded a more optimistic note. “The world economy came into this period of concern about Europe with stronger underlying momentum and growth than many people expected, and we’re in a much stronger position to get through this,” Geithner said.