The largest global banking lobby has called on world governments to take additional measures to avoid falling into a global recession, but warned that any state takeover in the private sector must be strictly temporary.
In an open letter to U.S. President George W. Bush, host of the summit of the 20 leading world economies in Washington on Saturday, the Institute of International Finance (IIF) urged world leaders to better coordinate their efforts aimed at stabilizing the financial system."It is crucial that lawmakers take additional steps to encourage recovery in financial markets to avoid a severe global recession", emphasizes the IIF in that letter.
The International Monetary Fund (IMF) last week forecasted global growth of 2.2 percent in 2009. Anything below 3 percent is considered a recession by the IMF. Leaders gathering at the summit in Washington will consider taking additional measures by their governments to stimulate the global economy and initiate the process of amending financial sector regulations. The summit will also be attended by representatives from several key emerging economies, including India, China, and Brazil, indicating the seriousness of the financial crisis.
The IIF believes that many countries have enough room to adopt additional fiscal stimulus packages to encourage consumption and to assist banks in restoring balance. The IIF welcomed the extent of governments’ previous engagement in mitigating the effects of the financial crisis, although many of their rescue packages involve purchasing stakes in struggling banks. IIF’s Managing Director Charles Dallara warned that these takeovers must be of a temporary nature, and that governments must sell their stakes as soon as the situation stabilizes. (H)
