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Friday, 4 September 2009

Beware double-dip recession

LONDON - BRITAIN'S finance minister warned on Thursday international complacency risks plunging the world economy into a double-dip recession, in a stark message ahead of a G-20 finance ministers' meeting.

Chancellor Alistair Darling said governments must carry on spending to ensure the global economy returns to sustainable growth next year, after the worst financial crisis since the Great Depression.

'My view is that the biggest single risk to recovery is that people think the job is done,' Mr Darling said in an interview with The Independent. 'There is a real risk that either governments or people generally think 'We have done that, we are on the path to recovery',' he told the newspaper.

Removing government stimulus packages is expected to be on the agenda when G-20 finance ministers meet in London from Friday, ahead of the G-20 leaders' summit in Pittsburgh later this month.

With Japan, France and Germany officially out of recession, minds are turning to coordinating the withdrawal of packages and government bailouts for banks - although with caution.

British Prime Minister Gordon Brown warned this week that while the Group of 20 largest economies must show willingness to work together on the removal of fiscal and monetary stimulus, it was too early to embark on exit strategies.

Ahead of the G-20 meet, France is also leading calls for a coordinated crackdown on bankers' bonuses, blamed for excessive risk-taking in the financial sector, including for a mandatory cap.

Mr Darling said he was wary of anything that amounted to a 'global pay policy' but saw 'no problem' with the French plans to claw back bonuses after three or four years if they were not justified by performance.

On the issue of spending, Mr Darling is concerned that other nations, in particular France and Germany, will push for a rapid decline in stimulus spending, jeopardising recovery in Britain and around the world.

'A lot of obstacles' remained to be negotiated on the path to recovery, including rising oil prices and unemployment, he said. 'We are at a critical stage,' he said. -- AFP

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