The world economy is facing “significant downside risks” stemming in part from the European debt crisis, leaders at the Asia-Pacific Economic Cooperation forum said.
Growth and job creation have weakened in many countries and further trade liberalization is “essential” to boost economic expansion, the leaders said in a statement in Honolulu today. A series of natural disasters in the region has also threatened growth, they said, without elaborating.
Europe’s sovereign-debt crisis was a frequent topic at the summit aimed at improving economic ties in the Asia-Pacific region. While the appointments of new governments in Greece and Italy have eased concerns the crisis will deteriorate, APEC officials have said they are bracing for more turmoil in the euro zone that may push the global economy into a recession and increase volatility in financial markets.
“We meet at a time of uncertainty for the global economy,” the leaders said in the statement. “Significant downside risks remain, including those arising from the financial challenges in Europe. APEC’s core mission continues to be further integration of our economies and expansion of trade among us.”
Emerging-market nations from Brazil to China to Indonesia have started to cut interest rates or increase fiscal measures to shield growth. Federal Reserve Chairman Ben S. Bernanke said this month a U.S. recovery may be “frustratingly slow” while International Monetary Fund Deputy Managing Director Zhu Min and China’s National Economic Research Institute Director Fan Gang told business leaders at an APEC forum yesterday that the Chinese economy was heading for a “soft landing” as growth eases.
Europe is battling a debt crisis that so far has cost five leaders their jobs, including Italian Prime Minister Silvio Berlusconi. In Greece, a unity government led by Lucas Papademos was sworn in Nov. 11 with a mandate to implement budget measures and decisions related to a 130 billion-euro bailout agreed on Oct. 26.
The euro region’s rescue plan “needs to be put in place with the speed that markets require and with the force necessary to restore confidence,” U.S. Treasury Secretary Timothy F. Geithner said Nov. 10 after meeting with other APEC finance ministers.
Investors this month pushed Italian bond yields passed the 7 percent level that drove Greece, Ireland and Portugal to seek bailouts. Spain risks seeing its borrowing costs rise closer to those of Italy as European Central Bank buying fails to cap yields and slowing growth threatens to make its deficit- reduction targets unachievable.
“Without a solution to the eurozone crisis, the world economy could be swept into a downward spiral of collapsing confidence, weaker growth, and fewer jobs,” IMF Managing Director Christine Lagarde said at the APEC summit today. “This would affect all nations and so we all have a stake in resolving that crisis.”
APEC leaders have pushed for more trade and services liberalization in the economic grouping that represents more than 40 percent of world commerce.
The euro maintained gains today following a two-day rally on prospects investor confidence in Italy’s ability to contain its debt will be revived after Mario Monti, a former European Union competition commissioner, takes over as prime minister.
The euro traded at $1.3767 as of 12:23 p.m. in Tokyo from $1.3750 on Nov. 11 in New York. Europe’s shared currency bought 106.25 yen from 106.10.
The U.S. and eight other Asia-Pacific nations at the meetings outlined a framework for a free trade accord and agreed to accelerate negotiations with the aim of completing an agreement within the next year. Japan, Canada and Mexico have expressed interest in joining discussions on the Trans-Pacific Partnership.
Some nations are seeking their own free-trade agreements as the World Trade Organization’s Doha round of global talks remains unfinished after a decade.
“We recognize that further trade liberalization is essential to achieving a sustainable global recovery in the aftermath of the global recession of 2008-2009,” the leaders said today. “We have deep concerns regarding the impasse confronting the Doha Development Agenda, and the reality is that a conclusion of all elements of the Doha agenda is unlikely in the near future.”
Currency policies were also the focus of discussions at the meetings in Honolulu. President Barack Obama pressured China on its exchange-rate, telling President Hu Jintao that the American public and businesses are growing “increasingly impatient and frustrated” with the pace of progress in relations between the two nations.
APEC finance ministers said in a statement they are committed to moving “more rapidly” toward market-determined exchange rate systems and will increase currency flexibility to reflect their economic fundamentals. Officials from the 21-member grouping also said they will avoid persistent exchange-rate misalignments and refrain from competitive currency devaluations.at email@example.com
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