|
Global leaders
discuss twin debt crises
HELTER SKELTER: An article in the ¡¥People¡¦s
Daily¡¦ yesterday said Asian exporters, who depend on US demand, could be the
biggest victims of mounting US economic woes
Reuters, TOKYO and SEOUL
Global policymakers held an emergency conference call yesterday to discuss the
twin debt crises in the EU and the US that are causing market turmoil and
stoking fears that developed economies could slide back into recession.
After a week that saw US$2.5 trillion wiped off global stock markets, political
leaders are under mounting pressure to reassure investors that Western
governments have both the will and ability to reduce their huge and growing
public debt loads.
South Korea said finance deputies from the G20 major economies discussed the
European debt crisis and US sovereign rating downgrade yesterday morning in
Asian time zones.
A Japanese government source said finance leaders from the G7 developed
economies would also discuss the crisis and could issue a statement afterwards,
although the timing of such a call was unclear.
The European Central Bank (ECB) was scheduled to hold a rare conference call
yesterday afternoon. Investors are anxiously looking for the central bank to
start buying Italian and Spanish debt today to -stabilize prices, a proposal
that has split the ECB¡¦s governing council.
French President Nicolas Sarkozy, who chairs the G7/G20 group of leading
economies, conferred with Britain¡¦s Prime Minister David Cameron on Saturday.
In Washington, a White House economic advisor castigated ratings agency Standard
and Poor¡¦s (S&P) for downgrading the US¡¦ credit rating from ¡§AAA¡¨ to ¡§AA-plus,¡¨
a move that could ripple through markets by pushing up borrowing costs and
making it more difficult to secure a lasting recovery.
Washington¡¦s Asian allies rallied round the battered superpower, with Japan and
South Korea both saying their trust in US Treasuries remained unshaken.
There was no confirmation of the timing of a G7 call for finance ministers and
central bankers, but a second Japanese government source said it ¡§would be
normal¡¨ for it to take place before Asian markets opened. Tokyo¡¦s stock market,
the biggest in Asia, starts trading at 9am today.
The most immediate concern for financial markets was the debt crisis in the
eurozone, where yields on Italian and Spanish debt have soared to 14-year highs
on -political wrangling and doubts over the vigor of budget cuts.
Investors saw the ECB¡¦s failure to include Italy and Spain in a -relaunch of its
bond purchases late last week as a sign of the depth of political divisions over
the role of the eurozone currency.
S&P¡¦s one-notch downgrade of the US sovereign credit, while not totally
unexpected, adds another level of uncertainty.
¡§However justified, S&P couldn¡¦t have picked a worse time to downgrade the US,¡¨
Rabobank said in a note to clients.
China, the largest foreign holder of US debt, took the world¡¦s economic
superpower to task for allowing its fiscal house to get into such disarray.
Yesterday, a commentary in the People¡¦s Daily said Asian exporters, who depend
on demand from the US, could be among the biggest victims of the mounting US
-economic woes.
¡§The lowering of the United States¡¦ long-term sovereign credit rating has
sounded a warning bell for the international currency system dominated by the US
dollar,¡¨ said economist Sun Lijian (®]¥ß°í), writing in the paper.
|
