WASHINGTON (AP) — The world's major economic powers are pledging to launch a bold effort to deal with a chronic slowdown in growth and a European debt crisis threatening to push the global economy into another recession. But so far, markets are not buying the new commitments.
U.S. stocks were falling in early trading Friday and those losses followed big declines in Asia and Europe. All of the market turmoil was occurring as finance officials from around the world were in Washington for the annual meetings of the 187-nation International Monetary Fund and its sister lending institution, the World Bank.
In advance of those talks Friday, finance ministers and central bank presidents of the Group of 20 major economies issued a statement late Thursday pledging to do what was necessary to restore financial stability and calm financial markets. Treasury Secretary Timothy Geithner and Federal Reserve Chairman Ben Bernanke represented the United States at the discussions.
Finance officials on Friday said they were undaunted by the initial adverse market reaction and pledged to push forward with implementation of their commitments, especially in the area of dealing with the European debt crisis, which threatens to engulf the 17 nations that share the euro as a common currency.
"The leading lights of the eurozone are aware that time is running out," British Finance Minister George Osborne told reporters. "There is a far greater sense of urgency than there was three weeks ago about the necessity for the eurozone to address its problems and there is pressure on the eurozone from across the international community."
Britain does not use the euro currency but Germany, the largest economy in Europe, does. German Finance Minister Wolfgang Schaeuble said Friday that a second massive bailout package aimed at keeping heavily indebted Greece from defaulting may have to be re-evaluated because Greece's debt inspectors found trouble in implementing previous promises.
The finance officials of traditional economic powers such as the United States, Japan and Germany and major emerging nations such as China, Brazil and India were seeking to demonstrate strong resolve in the hope that it will calm jitters that had sent financial markets plunging on Thursday.
"We are taking strong actions to maintain financial stability, restore confidence and support growth," the G-20 joint statement said. "We commit to take all actions to preserve the stability of banking systems and financial markets as required."
The G-20 group had not been scheduled to issue a statement after their working dinner but the turmoil on Thursday in global markets resulted in a change in plans. The group issued a one-page document that they hoped would demonstrate sufficient resolve.
French Finance Minister Francoise Baroin told reporters the statement represented a "strong global" response to what he called a "very serious situation."
A senior U.S. Treasury official who briefed reporters on condition of anonymity to discuss the closed-door discussions said that all the G-20 countries felt there was a sense of urgency to take strong actions to deal with the financial market turmoil.
Investors are worried that Europe's debt crisis could destabilize the global economy at a time when growth has already slowed significantly due to a jump in oil prices earlier in the year and a pronounced slowdown in the United States, the world's largest economy.
The Dow Jones industrial average sank 391 points on Thursday, marking the second-straight day of massive losses on Wall Street.
IMF Managing Director Christine Lagarde said the world was entering a "dangerous phase" and World Bank President Robert Zoellick said he still believed the globe could avoid a double-dip recession "but my confidence in that belief is being eroded daily."
Greece could default on its debt next month unless it receives a $10.9 billion installment from a bailout fund managed by the European Central Bank, the European Commission and the IMF.
A default could destabilize other financially troubled European countries, such as Portugal, Ireland, Spain and Italy. It would also deal a blow to many European banks, which are large holders of Greek government bonds.
Major emerging economies including Brazil, India, China, Russia and South Africa said in a statement they would "consider, if necessary, providing support through the IMF or other international financial institutions" to address the European debt crisis. But the group played down suggestions that they would be willing to purchase government debt of troubled European countries.
Geithner said the United States has a huge stake in seeing Europe succeed and the G-20 group discussed proposals he has raised to expand the resources of the European bailout fund by using methods the United States employed during its own financial crisis in 2008-2009.
The G-20 communique spoke of trying to increase the flexibility of the rescue fund and maximize its resources but spelled out no specific ways to accomplish those goals.
The joint statement also said the G-20 nations planned to produce a "collective and bold action plan" to boost global growth and deal with high government debt to be unveiled in time for a summit of G-20 leaders including President Barack Obama in Cannes, France, on Nov. 3-4. However, the communique gave no hint of what would be included in the new action plan.
Europe has struggled to convince financial markets that it has the will to prevent a catastrophic debt default by Greece that could cascade to other highly indebted European countries. The United States has been unable to produce a long-term deficit reduction because of a deadlock between Democrats and Republicans about the role of spending cuts and tax increases.
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Associated Press writers Harry Dunphy, Luis Alonso Lugo and Christopher S. Rugaber contributed to this report.
Copyright 2011 The Associated Press.