News / Europe

Greek Debt Crisis Takes Center Stage at World Economy Meetings

William Ide

World economic officials worked to hammer out a rescue plan for Greece as Athens' debt crisis loomed over a meeting of International Monetary Fund finance ministers in Washington Saturday.  At the meetings, global finance leaders stressed that the world's economy was rebounding from the financial crisis and pledged to address the recovery risk of high government debt.

Greek Finance Minister George Papaconstantinou met with several world finance leaders Saturday on the sidelines of the IMF and the World Bank's spring meetings in Washington.

In addition to meeting with the head of the IMF, and several senior European economic officials, he also held talks with U.S. Treasury Secretary Timothy Geithner.

In a statement after their meeting, Geithner urged Greek, IMF and European officials to move quickly  on a package of concrete reforms and financial support for Greece.

Greece is seeking emergency loans of about $40 billion from European countries and an additional sum of more than $13 billion from the IMF.

It has put in place an austerity program that calls for civil servant pay cuts, freezes pensions and raises taxes.

The Greek government is facing mounting political pressure and protests against the austerity measures have paralyzed the country.

Speaking at a press conference following Saturday's meetings, IMF managing director Dominique Strauss-Kahn told Greek citizens that they did not need to fear the IMF, stressing that the fund was there to help. " The IMF is a kind of a cooperative organization, where all the countries of the world work together to try to help those in troubles. Today, Greece is in trouble. Tomorrow, maybe another one. And so, what is the IMF doing: trying to provide advice on behalf of the entire international community; trying to provide resources to help on behalf of the entire community," he said.

On Friday, Greece admitted it could no longer pay down its massive debts.  Athens is seeking the emergency loans before it must make additional payments on its debt next month.

As finance leaders looked to help solve Greece's debt crisis they also pledged to address the risk posed to the global recovery from high government debt.

Strauss-Kahn says that over the coming months the IMF would be looking at the issue of the heavy burden of debt as well as unemployment. He says it will also be examining capital flows to emerging countries and the risks that they pose to creating financial bubbles. "So this first phase, after panic action and relief, is clearly the phase of rebuilding. Rebuilding the international institutions and trying to make them more affective to be able to - not to avoid of course - but prevent the likelihood of any crisis in the future," he said.

Anoop Singh, the director of the IMF's Asia and Pacific department says Asia was now leading the global economic recovery, with most of the region's economies rebounding to pre-crisis levels. "This is the first time that Asia's contribution to a global recovery has outstripped that of other regions. Second, while in past recessions we have seen Asia's recovery - in those cases - generally driven by exports, this time it has been reinforced by resilient domestic demand," he said.

Singh added that one of Asia's biggest economies, China, recognizes the need to let the value of its currency strengthen to help boost private consumption.

In recent weeks, the value of China's currency has been the focus of heated debates. The United States and a growing number of other countries including Brazil and India have urged Beijing to let its currency strengthen to help correct trade imbalances.

Economists argue that such a move would help make exports from advanced and other nations more competitive against Chinese goods.

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