President Barack Obama used the annual meeting of the United Nations General Assembly to press leaders, in public and private, to take “coordinated action” to prevent the world’s economy from slipping into a recession.
As a bid by Palestinians for United Nations recognition dominated discussions at the world body in New York, Obama conferred with French President Nicolas Sarkozy, U.K. Prime Minister David Cameron and Japanese Prime Minister Yoshihiko Noda on finding a way to sustain a fragile recovery amid the European debt crisis and sluggish U.S. growth.
“We acted together to avert a depression in 2009,” Obama said in his speech to the General Assembly yesterday. “We must take urgent and coordinated action once more.”
Officials are gathering in Washington this week for the International Monetary Fund and the World Bank annual meetings, which begin tomorrow. The IMF said Sept. 20 that political squabbling in Europe over ways to prevent the debt crisis from spreading and delays in implementing measures are raising concerns about the risk of defaults by countries such as Greece.
The conversations Obama had on the sidelines of the UN also served to preview points that will be on the agenda when leaders of the world’s biggest economies convene for a Group of 20 summit in Cannes, France, on Nov. 3-4.
Before his first face-to-face meeting with Obama, Noda said there is “emerging concern” that “we might be drawn back into another recession.”
Paving the Way
The Washington-based IMF cut its global growth forecast this week and predicted “severe” repercussions if policy makers fail to stem the debt turmoil threatening to engulf Italy and Spain. Sarkozy, speaking to reporters before meeting with Obama, said, “There is still much to do, in particular in paving the way to the G-20 summit.”
Finding a path to growth is “our number one priority,” he said. It wasn’t clear whether world leaders can replicate the same unified stance they adopted at the April 2009 summit in London.
“The euro crisis itself can’t be solved by the G-20 because it is the euro-zone countries which must now decide if they will cede fiscal policy authority to the union in order to maintain a common currency,” said Daniel Price, a managing director at Rock Creek Global Advisors LLC who was an economic adviser to former President George W. Bush.
“The G-20 played a critically important role in 2008-09 at the onset of the economic crisis in setting an agreed roadmap for financial reform and economy recovery,” he said in an e- mail. “But as countries have recovered at different speeds, that unity of purpose has somewhat frayed.”
The European Central Bank and its counterparts in the U.K., Switzerland, Japan and the U.S. last week said they will provide unlimited three-month money to lenders in three tenders starting in October. That was after funding dried up for European banks in general, and French lenders in particular, amid concern Greece is headed for a default.
The IMF said the European debt crisis has generated as much as 300 billion euros ($410 billion) in credit risk for European banks.
In the U.S., the Federal Reserve will replace much of the short-term debt in its portfolio with longer-term Treasuries in an effort to further reduce borrowing costs and keep the economy from relapsing into a recession.
Treasuries advanced today, with yields on 30-year bonds dropping 18 basis points, or 0.18 percentage point, to 2.81 percent at 1:31 p.m. in New York, according to Bloomberg Bond Trader prices. A one-point gain in 10-year notes pushed yields down 11 basis points to 1.75 percent after touching 1.7333 percent, the lowest in Fed figures beginning in 1953.
Amid concern central banks are running out of tools to prevent a recession the Standard & Poor’s 500 Index lost 3.9 percent to 1,120.99 at 3 p.m. New York time. The MSCI All- Country World Index sank 4.9 percent, extending losses from its May peak to 23 percent, and emerging-market stocks plunged the most in almost three years.
In his public comments, Obama didn’t specify what steps should be taken, insisting that global cooperation was again needed. “We are coordinating closely in managing a very difficult time for the global economy,” he said before his session with Cameron.
‘Forceful’ Action Urged
During his conversations with European leaders the president has “encouraged them to take forceful and decisive action” to manage the debt crisis, White House press secretary Jay Carney told reporters today.
Finance ministers and central bankers from the Group of 20 nations gather in Washington for the annual meetings of the International Monetary Fund and World Bank, where the European crisis will be a focus.
The economy also was the subject of the president’s talk yesterday at the Clinton Global Initiative. The world is “still reeling” from the global recession and as the biggest economy the U.S. can help lead the recovery, Obama said.
“When America’s growing, the world is more likely to grow,” Obama told the gathering, founded by former President Bill Clinton and convened annually in conjunction with the UN session. “Our future depends on fighting this downturn with everything we’ve got right now.”
Obama said the $447 billion package of tax cuts and spending that he has proposed is aimed at addressing “the terrible toll that unemployment inflicts on people.”
During Clinton’s two terms in office, Obama said, the growth in jobs and wealth was spread across all economic groups. Now the U.S. is facing a “once-in-a-generation crisis,” he said.
“We can get through it, but our politics right now is not doing us any favors,” Obama said, referring to opposition he faces from Republicans, who control the House of Representatives.