Asia, Europe close ranks to ease financial crisis
October 26th, 2008 | by admin |By Alan Wheatley and Elizabeth Piper
BEIJING/LONDON (Reuters) - Asian and European leaders closed ranks on Saturday to try to bolster confidence among investors who fear that a global credit crunch has ushered in a deep and damaging world recession.
The worst financial crisis in 80 years has forced countries to work together to find ways to help shore up a financial system crippled by banks fearful of lending to each other.
But with evidence mounting that Europe is already in recession, analysts fear that cooperation in shoring up banking systems could be threatened as governments begin to turn their attention to reviving domestic demand.
“We must use every means to prevent the financial crisis impacting growth of the real economy,” Chinese Prime Minister Wen Jiabao said at the end of a two-day summit of 43 Asian and European leaders in Beijing.
Governments have pledged about $4 trillion to support banks and restart money markets to try to stem the crisis and are considering tougher financial rules to guard against any repeat.
Wen said countries needed to strike a balance between innovation and regulation and between savings and consumption.
“We need financial innovation, but we need financial oversight even more,” he said, adding that China’s priority was to spur domestic demand to ensure the country maintained fairly fast, steady growth.
U.S. President George W. Bush, who will host a global summit on the financial crisis next month, said in a radio address on Saturday, “While the specific solutions pursued by every country may not be the same, agreeing on a common set of principles will be an essential step toward preventing similar crises in the future.”
The International Monetary Fund on Saturday cleared Managing Director Dominique Strauss-Kahn of harassment, favoritism and abuse of power after an inquiry into his affair with a subordinate.
The IMF had sought to deal with the Strauss-Kahn inquiry quickly so as not to distract the global financial firefighter from dealing with the international financial crisis.
GULF MEETING
In the Gulf, finance ministers and central bank governors said at a meeting on coordinating policy that they would look at directing more government funds into banks and regional stock markets, Al-Arabiya television reported.
Saudi Arabia, the United Arab Emirates and four other Gulf states have so far adopted separate responses to ease the pressures of the liquidity crunch on their banking sectors.
Qatar’s finance minister, Youssef Kamal, said the crisis would give impetus to create regional monetary union and he was sure the measures taken to protect the economies were sufficient.
Any significant redirection of Gulf investment to domestic markets could be a concern for banks and other firms in the West which have eyed the huge sums in the region’s state-run sovereign wealth funds as a potential source of capital while European and U.S. credit and share markets are seized up.
