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* US, OECD urge G7 action to spur growth, fix debt crisis
* August market turmoil piles pressure on G7 finmin talks
* G7 seen pushing different responses for Europe (Chicago Options: ^REURTRUSD ? news) , U.S.
* Obama unveils jobs plan while Europe focused on debt
MARSEILLE, France, Sept 9 (Reuters) ? G7 finance chiefs
meet on Friday under heavy pressure to take action to revive
flagging economic growth in rich nations and to calm the
biggest confidence crisis in markets since the 2007-09 credit
crunch.
Host country France has called for a coordinated response
from the Group of Seven industrialised nations after mounting
anxiety over Europe?s debt crisis and the fragility of its
banks caused a big fall in world stockmarkets in recent weeks.
Differences between the economic problems facing the United
States, Britain and euro zone states are complicating the task
though, meaning one-size-fits-all solutions, like moderating
government budget cutbacks or unleasing more monetary
stimulus,will not work.
No communique will be issued after the talks, something
French Finance Minister Francois Baroin said would make for
freer discussions. He told the daily Le Figaro each G7 country
should adopt economic measures to suit its situation.
?In terms of the direction to take between stimulus and
budgetary consolidation, some are in favour of a uniform
action,? Baroin said. ?For my part, my tendancy is to look for
what is most adapted to each country?s situation.?
The G7 finance ministers and central bankers will sit down
from mid-afternoon in the Mediterranean port city of Marseille,
with the faltering economic recovery, the euro zone debt crisis
and the stability of the banking sector the issues of the day.
A working dinner will be followed by briefings from around
9:15 p.m. local time (1915 GMT) by the French, German and
Japanese delegations and European Central Bank President
Jean-Claude Trichet. IMF Chief Christine Lagarde will brief on
Saturday.
Take-A-Look (Munich: 867225 ? news) on G7 meeting: [ID:nL5E7K61TC]
^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
US, OECD WANT STRONG SIGNALS
U.S. Treasury Secretary Timothy Geithner said ahead of the
talks that it was ?imperative? to bolster growth and the OECD
called for ?strong signals? from the G7 and urged central banks
to keep interest rates low and consider other forms of monetary
easing.
With Asian economies deeply concerned about the West?s debt
crisis and slow growth, Japan (NYSE: MCO ? news) is also expected to speak out on
the euro zone debt crisis and may also voice concerns over the
strength of the yen and reserve the right to unilateral
action.
A Morgan Stanley (EUREX: DWDF.EX ? news) research note speculated central bankers
might announce some kind of coordinated monetary easing.
But while decisions by the European and British central
banks on Thursday to keep interest rates unchanged accentuated
the gloom in Europe, neither indicated that a move was
imminent.
Fears the global economy may have entered its most
difficult period since the 2008 collapse of investment bank
Lehman Brothers have injected focus into Friday?s talks but
there has been little evidence of urgent, coordinated action by
policymakers so far.
While Europe wants to keep its commitment to austerity, the
United States is closer to the International Monetary Fund?s
position that fiscal stimulus is needed. President Barack Obama
announced a $447 billion jobs package of tax cuts and
government spending on Thursday that attempts to revive the
stalled economy recovery and avert another recession.
[ID:nN1E7870HE]
In a Financial Times opinion piece on Thursday, the U.S.
Treasury Secretary Geithner said while a repeat of the massive
coordinated fiscal stimulus efforts of 2009 was not possible,
decisive action was needed to deal with a bleakening in the
rich world?s growth outlook.
The Organisation for Economic Co-operation and Development
forecast on Thursday that growth across the G7 economies would
average 1.6 percent on an annualised basis in the third quarter
and slow to just 0.2 percent in the last quarter of 2011, a
sharp slowdown from its May outlook.
?With respect to three months back the growth scenario
looks much worse, one would say that growth is stagnating,?
said OECD chief economist Pier Carlo Padoan. [ID:nL5E7K8194]
EXPECTATIONS HIGH
The G7 has struggled to retain significance since the
larger G20, which includes major emerging market powers like
China and Brazil, assumed prominence in the wake of the 2008
financial crisis. The G20 meets later this month in Washington
at the same time as the annual autumn meetings of the IMF (Berlin: MXG1.BE ? news) and
World Bank.
Many economists argue that radical solutions to global
problems require these emerging powers to boost their domestic
economic growth or take part in a monetary stimulus
themselves.
At the same time, being smaller means the G7 can agree more
swiftly on action where needed, and expectations were running
high in markets of a strong statement or action plan.
A source in Brussels said this week the G7 would likely
agree to keep monetary policy accommodative, slow fiscal
consolidation in states where that is possible, and implement
structural reforms.
Geithner said in his op-ed in the Financial Times that the
United States must strengthen employment, Europe must act more
forcefully to quell its debt crisis, and China and other
emerging markets should strengthen domestic demand and allow
their currencies to rise more rapidly.
He acknowledged that some governments with high deficits
and high borrowing costs have no choice but to consolidate
their fiscal positions, while others have room to take more
action to support growth or at least slow their fiscal
consolidation.
The OECD?s Padoan said G7 finance chiefs risked sending the
wrong signal if they did not use Marseille as an opportunity to
indicate they are ready to take action if growth slows
further.
Morgan Stanley economists Manoj Pradhan and Joachim Fels
said in their research note that fiscal easing would be the
most effective, but the burden was instead on central banks to
stimulate growth because governments finances are in such weak
state.
?Monetary easing might come as soon as this weekend?s G7
meeting as part of a coordinated effort ? akin to October
2008, when seven central banks cut their policy rates together
in the aftermath of the Lehman bankruptcy,? they wrote.
The OECD said that while public finances were too weak in
many countries to provide a fiscal boost, those countries in a
stronger position should consider more easing if the slowdown
proves long-lasting.
(Additional reporting by Daniel Flynn, John Irish and Leigh
Thomas in Paris, and David Lawder in Washington)
Article source: http://uk.finance.yahoo.com/news/WRAPUP-1-Economic-gloom-piles-targetukfocus-2202231535.html?x=0
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