G-20 pledges to use all means to stabilise markets

Sridhar Krishnaswami

Washington, Oct 12 (PTI) Vowing to work together to
overcome the financial turmoil, India and other G-20 countries
have said they would use all "economic and financial tools" to
assure the stability of markets as they emphasised the need
for international cooperation in the wake of the global
implications of the crisis.

The Group of 20 industrial powers and emerging economies
said they were "committed to using all the economic and
financial tools to assure the stability and well functioning
of financial markets," according to a communique issued after
a special emergency meeting of the bloc here Saturday night.

They also expressed their commitment to ensure that
"actions are closely communicated so that the action of one
country does not come at the expense of others or the
stability of the system as a whole," it said.

Chaired by Brazilian Finance Minister Guido Mantega, the
meeting of the G-20 Finance Ministers and Central Bank
Governors stressed the resolve "to work together to overcome
the financial turmoil and to deepen cooperation to improve the
regulation, supervision and the overall functioning of the
world's financial markets."

The members emphasised that the global implications of
the current crisis "reinforced the need for international
cooperation as well as continued actions, in countries where
necessary, in key areas such as macro-economic policy,
liquidity provision, strengthening financial institutions and
protecting retail depositors," the communique said.

Reserve Bank of India (R.B.I.) Governor D. Subbarao,
along with the Secretary Economic Affairs Ashok Chawla,
participated in the extra-ordinary Meeting of the G-20 called
by the Group's Chair Brazil and U.S. Treasury Secretary Henry
Paulson at the Headquarters of the International Monetary
Fund.

While there will be impact of the crisis on the emerging
markets including India, the country "stands prepared" to
counter any spillover effects of the crisis, Subbarao told the
meeting.

U.S. President George W. Bush attended the session where
he spoke briefly on the imperative of all nations to act in a
concerted manner, according to a participant at the meeting.

The G-20 endorsed the communique of the International
Monetary and Financial Committee of the Board of Governors of
the International Monetary Fund issued earlier, stressing that
they will remain engaged and in close contact and look forward
to meeting again in Sao Paulo, Brazil, on November 8-9, when
they will further examine these and other issues.

"...What is very important is that take, for instance,
the first bullet point from the communique, which says to use
all available tools to support systematically important
financial institutions and prevent their failure. That is
a very important thing both for people working in markets and
for simple citizens that no one is going to let an important
financial institution fail.

"It can be done in different ways, depending on different
countries; for legal reasons, historical reasons, it can be
done in a different manner so it has to be left to the
national governments to see how to implement this kind of
thing when they didn't do it already. But the fact that all
the governments are now committed to do that is a very, very
strong commitment and I hope that the market will understand
that," I.M.F. Managing Director Dominque Straus-Kahn said.

Describing the current financial mess as "a systemic
crisis," Youssef Boutros Ghali, the Chair of the International
Monetary and Financial Committee (I.M.F.C.), said that
"therefore, it requires systemic measures."

Boutros Ghali said the decisions taken and the communique
issued signify that the membership of the I.M.F. is committed
to systemic measures.

They have endorsed measures that address "the unfreezing
of markets, address the guaranteeing of money markets and the
guaranteeing of deposits, etc, that they go toward secondary
markets," he said.

"So, we endorsed the use of exceptional instruments. If
you add the amounts of monies that have been put up by
governments until today, they would easily cross over into
more than a trillion, when we count what the U.S. has
pledged for its own system, European Union, etc, is well
beyond the trillion.

"This is not a small affair and, therefore, it is being
met with seriousness and it is being met with measures that we
think in the membership will solve this problem," Boutros
Ghali said.

After the meeting of the G-20 countries which
collectively account for 85 per cent of the global economy,
the attention now turns to the European leaders' gathering in
Paris to be held shortly during which they are expected to
come out with a collective action plan to help their ailing
banks.