Greek Finance Minister George Papaconstantinou holds a news conference Saturday during the International Monetary Fund and World Bank meetings in Washington to discuss the economic crisis in his country.
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WASHINGTON — Soaring oil prices that threaten to worsen unemployment and poverty added a sense of urgency to talks Saturday among global financial leaders.
They wrapped up three days of talks with pledges of closer cooperation and better surveillance of the global economy. However, it was uncertain just how far countries would be willing to go in reforming their domestic policies in response to international pressures.
The United States, which is facing plenty of criticism for its soaring federal budget deficits, campaigned to get the International Monetary Fund more heavily involved in monitoring currency rates.
The U.S. goal: bringing more pressure on China to move more quickly to allow its currency to rise in value against the dollar, a development that has helped to push the U.S. trade deficit with China up to record levels.
Treasury Secretary Timothy Geithner argued in his speech to the IMF's policy-setting panel on Saturday that the 187-nation lending agency should exercise the powers it already has to prod nations such as China to move more quickly to adopt flexible exchange rates.
He said the failure of a major country such as China to reform its currency system is putting undue strains on other emerging nations that have adopted flexible currency systems.
"The IMF has the capacity and the responsibility to play a critical role in solving this problem and should do so by significantly strengthening its surveillance," Geithner said.
The IMF did not address Geithner's appeal directly in its concluding statement Saturday. China has strongly resisted previous U.S. efforts to increase the IMF's role in advising countries on currency policies. U.S. critics contend that China is manipulating its currency to keep it as much as 40 percent undervalued against the dollar to gain significant price advantages for its products.
Singapore Finance Minister Tharman Shanmugaratnam, head of the IMF steering panel, said at a concluding news conference that all countries realized the importance of policy reform and better coordination as the global economy recovers from the worst economic downturn since World War II.
"Although we are in a better position than a year ago, there are significant vulnerabilities," he told reporters. "We are still in a fragile situation. We have to be extremely watchful."
IMF Managing Director Dominique Strauss-Kahn said it would be critical for all nations to guard against complacency, especially in the face of new threats from higher oil and food prices, which were exacting a particular toll on the world's poorest nations.
World Bank President Robert Zoellick called the surge in food prices the biggest threat to the world's poor with 44 million more people being pushed into poverty over the past year because of higher prices.
"We are one shock away from a full blown crisis," Zoellick said at a news conference wrapping up the three days of discussions. Zoellick said the World Bank was pursuing a variety of programs to provide support to poor countries struggling with high food costs.
But Max Lawson, a spokesman for Oxfam, the international aid advocacy group, criticized the finance officials for putting off any action on increased support until a meeting of G-20 agricultural ministers in June.
"Leaders today said the food crisis is desperately urgent, so urgent they will act on it ... in June. That's 66 days away. Nearly half a million children will have died of hunger by then," Lawson said.
A European debt crisis which engulfed Greece a year ago and then Ireland has now ensnared Portugal, forcing that country to request financial support from European nations and the IMF. Geithner met with top finance officials from the European Union, Portugal and Greece on Saturday to get an update on the unfolding crisis.
Greek Finance Minister George Papaconstantinou said that Geithner had expressed support for Greece's efforts to trim government spending and boost taxes to put the country on a firmer financial footing. He told reporters that there were "a lot of rumors" circulating that Greece would still be forced to default on its debt. He dismissed the rumors and said the government was determined to ensure that a debt default did not occur.
The talks Saturday followed meetings on Friday of the Group of 20 nations, a group that includes traditional economic powers such as the United States and European nations, and emerging economies such as China, India and Brazil.
The G-20 reached agreement on a plan to provide increased monitoring of countries in the G-20, starting with seven of the largest nations, to make sure that their government debt, trade balances and investment flows were not rising to levels that posed a risk to the global recovery. A report on the surveillance of those seven nations — the United States, China, Japan, Germany, France, Britain and India — was to be presented in November at a summit of the G-20 leaders in Cannes, France.
Geithner on Saturday said the Obama administration was committed to doing its part to reduce America's soaring federal deficit, which is projected to hit $1.5 trillion this year despite approval this week in Congress of a 2011 budget that will trim $38 billion in spending.
Despite the new commitment to monitor global imbalances, it was not clear how effective the monitoring system will be, especially in light of significant opposition from China to foreign pressure to make changes in its currency policies that have contributed to huge trade surpluses.
But Mexican Finance Minister Ernesto Cordero said the G-20 agreement was a significant milestone.
"The fact that these recommendations are not mandatory does not mean they do not make pressure" on nations to reform their economic policies, he said.
But Brazilian Finance Minister Guido Mantega warned that many dangers to the global economy still existed.
"The root causes of the crisis — oversized financial sectors, excessive financial risk-taking, destabilizing cross-border capital flows ... have not been fully addressed," he said in his remarks to the IMF meeting. "Not surprisingly, the recovery remains fragile."