Brussels, 06/02/2008 (Agence Europe) - On the eve of the G7 finance ministers meeting on Friday 8 February in Tokyo, the main union organisations are calling for a coordinated response to the crisis. In a press release published on 5 February, the International Trade Union Confederation (ITUC), the European Trade Union Confederation (ETUC) and the Trade Union Advisory Committee (TUAC) to the OECD backed the opinion given by the director general of the International Monetary Fund (IMF), Dominique Strauss-Kahn, who suggested the global economy should be supported through fiscal stimulus measures. This approach, however, did not receive much support at the G7.
The unions regard the intervention made by the world central banks at the end of 2007 and beginning of 2008 as positive but insufficient for tackling the developing crisis. The unions stress that confidence among market actors has disappeared and the banks are balking at lending out. They are also calling on the G7 to seriously take the call by the Director of the IMF into consideration. Any budgetary stimulus is not expected to translate into offering further tax cuts, as in President Bush's plan, and G7 finance ministers are expected to reach a coordinated strategy for a broad variety of measures in favour of stimulating demand, including wage increases. The unions are also encouraging the European Central Bank (ECB) to follow the cuts in interest rates made by the US Federal Reserve.
In an interview published on Monday 4 February in the French daily, Les Echos, Jean-Claude Juncker repeated that “there is no need to launch a vast programme for boosting the economic situation in Europe yet”. The Luxembourg prime minister pointed out at the end of the Eurogroup meeting he chairs that “we unanimously concluded that Europe was not at risk of a recession, as they are in the US, and there is no need for the same set of responses as in America to the financial crisis”. On Tuesday the German secretary of state for finance stated that Germany does not think a US style recovery plan is necessary ($146bn). Japan has doubts about such a plan too.
Although not many new things are expected at the Tokyo meeting in the context of political coordination, there are even fewer expectations regarding coordinated interest rate cuts. Nonetheless, G7 finance ministers will examine an interim report from the Forum on Financial Stability, on what lessons can be drawn from the recent turbulence. This report will be published after the G7 summit and is expected to recommend that the financial institutions publish the losses linked to the sub primes crisis. Berlin also wants the question of banking supervision to be tackled. In the event of a failure in a concerted G7 response at a European level, Germany might introduce stricter regulation at home, particularly with regard to its own funds in proportion to the risks and the setting up of incentive but measured-risk systems.
Oil prices, environmental issues and IMF reform are on the agenda. Exchange rates will also be discussed. China, Indonesia, South Korea and Russia have been invited to participate in the dinner as part of the official discussions. (A.B.)