APEC finance ministers vow to protect weak recovery
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Finance ministers from 21 Asia- Pacific economies Thursday pledged to keep stimulus packages, strengthen fiscal positions, slowly undertake structural reforms to keep the economy growing until it reaches a solid footing.
"We see Asia leads the world back to recovery and we see growth resumes in the United States and around the world after the worst recession in decades," U.S. Treasury Secretary Timothy Geithner said at a press conference after the two-day Asia-Pacific Economic Cooperation (APEC) Finance Ministers' Meeting.
"The consensus is that we continue to work together to lay foundation for a strong recovery and a more balanced recovery. A set of broader financial reforms will be in the interests of all countries in the region," Geithner said.
The 21-member APEC includes the world's top three largest economies -- the United States, Japan, China -- and accounts for more than half of the world's economic output. The finance ministers' meeting is a prelude to the annual APEC Economic Leaders' Meeting to be held on Nov. 14-15.
Ministers agreed to keep policies strongly supportive of economic growth in place until the private demand picks up and decided that the timing and types of policy measures to roll back the extraordinary stimulus packages should be in accordance with each economy's recovery stage. They also agreed to prevent any spillovers caused by the "exit strategies" they undertake.
"We agreed on the crucial role that supportive fiscal measures in the APEC region had played in avoiding an even deeper global recession and resolved to remain vigilant until the economic recovery gains traction," the statement said.
But they pledged to start implementing measures to strengthen fiscal credibility without negatively affecting demand as soon as possible. "We recognized the need to reduce and stabilize public sector debt burdens at a low and prudent level," the statement said.
Ministers pinpointed five key challenges to the world's recovery -- restoring growth potential; successfully exiting the extraordinary fiscal, financial and monetary policy measures; implementing credible medium-term fiscal consolidation strategies; and meeting the region's massive infrastructure needs.
Singapore's Finance Minister Tharman Shanmugaratnam said looking beyond the recovery, structural reforms have to be at the core of efforts to strengthen domestic demand over the medium to long term.
"We all agree (on the) need to find new paths for sustaining growth, because the era of the U.S. consumers being a key driver to the demand is over, and this is not going to come back any time soon," Shanmugaratnam said.
Ministers agreed to take concrete steps to correct the external deficit-surplus imbalance which is believed to have created conditions for the past global financial crisis.
Over the past decade, the practices of Asian economies using their massive savings to fund the U.S. debts are blamed for creating the global imbalance that tilted over to the financial crisis starting last year.
While the Asian economies were urged to nurture domestic consumption and investment demands to absorb the excessive external surplus, the U.S. was called on to strengthen its fiscal positions and rein in free-will spending.
"APEC members with sustained, significant external deficits pledge to undertake policies to support private savings and undertake fiscal consolidation while maintaining open markets and strengthening export sectors," the joint statement said.
"APEC members with sustained, significant external surpluses pledge to strengthen domestic sources of growth. According to circumstances in individual economies, this could include increasing investment, reducing financial markets distortions, boosting productivity in service sectors, improving social safety nets, and lifting constraints on demand growth," it added.
The ministers were also committed to strengthening financial supervision to prevent the re-emergence in the financial system of excess credit growth and excess leverage.
