US leans on Europe to deal with Greece
DRESDEN — Finance chiefs from the Group of Seven (G-7) economic powers met on Thursday to discuss how to revive a faltering global recovery, with the US leaning on Europe to reach a deal to avert a Greek bankruptcy.
The threat of a Greek default, rising oil prices and bond market turmoil are fuelling nervousness about an unwinding of the global economic recovery. A slowdown in China — not present at the talks in Dresden, Germany — is adding to the concern.
Speaking before meeting the Group of Seven finance chiefs, International Monetary Fund (IMF) MD Christine Lagarde said there was still a lot of work to do before Greece and its international lenders could clinch a cash-for-reforms deal.
“We are all in the process of working towards a solution for Greece,” Ms Lagarde said.
“Things have moved, but there is still a lot of work to do,” she said, adding that she believed Greece would fulfil its commitments.
G-7 sources said officials from the member countries — hosts Germany, the US, Japan, Britain, France, Italy and Canada — were speaking “in different formats all the time” about Greece at the Dresden meeting.
Athens and its European Union/IMF lenders have been locked in tortuous negotiations on a reform agreement for four months. Without a deal, Greece risks default or bankruptcy within weeks. Greece’s government said on Wednesday it was starting to draft a deal with creditors that would pave the way for aid, but European officials quickly dismissed the idea that the talks had reached such a stage.
On the eve of the G-7 meeting, US Treasury secretary Jack Lew urged international creditors to show more flexibility. He said he feared a miscalculation could lead to a new crisis that could have consequences for the wider world.
The differences over Greece follow a growth-versus-budget consolidation debate between the US and Germany at G-7 level.
Meeting under the heading, Towards a Dynamic Global Economy, the G-7 finance ministers and central bank chiefs began discussing economic reforms to increase their competitiveness. But volatile markets, sensitive to differing growth paths between economic regions, risk derailing their efforts.
In Frankfurt, European Central Bank (ECB) vice-president Vitor Constancio said a sell-off in financial markets that derailed the eurozone’s recovery was the biggest risk to the bloc’s financial stability.
ECB president Mario Draghi is taking part in the G-7 meeting.
Mr Constancio spoke following a slump in Chinese stocks after several major brokerages tightened requirements on margin financing.
Bank of England governor Mark Carney, who also chairs a global body of bank regulators, was due to update the G-7 finance chiefs on progress towards a new code of conduct for bankers and other changes to the way financial markets are overseen, after recent scandals in global currency and interest rate markets.
A G-7 source, speaking on condition of anonymity, said the finance chiefs would discuss new instruments for generating sustainable growth once monetary and fiscal policies had reached their limits.
Another topic was tax evasion. A German delegation source said the ministers were determined to stick to an end-2015 deadline to implement an action plan for tackling profit-shifting to reduce tax.