The world's finance ministers and central bank heads
are meeting this week in Tokyo for the annual meetings of the
International Monetary Fund (IMF) and World Bank Group with the
eurozone debt crisis the dominant theme.
Other items on the agenda are growing government debt, the failure of many countries to undertake structural reforms and the slow pace of IMF reforms aimed at having the international lender better reflect the increasing influence of emerging economies and globalization.
Eurozone debt crisis
Whether Greece would receive the next tranche of aid from its international donors in Europe and the IMF remained unclear. Athens has to comply with demands for spending cuts the lenders have imposed. If the tranche amounting to 31.5 billion euros (40.5 billion dollars) is not paid, Greece faces bankruptcy and exclusion from the eurozone.
Expectations are that the money would be paid in the end to retain Greece in the eurozone, but it was also unclear whether and when Spain, which is already tapping into eurozone loans to bail out its banks, would apply for a full bailout.
The IMF on Tuesday downgraded its global economic growth forecasts once more, predicting a 3.3-per-cent expansion for 2012, down from a July projection of 3.5 per cent, and 3.6-per-cent growth in 2013, down from 3.9 per cent, while warning that growth would be cut further if European and US officials fail to stem their economic crises.
Further structural reforms could be advocated, and in the view of the IMF, the process towards creating a eurozone banking union is proceeding too slowly.
Boosting IMF funding
The war chest to fund the IMF's firewall against global economic crises is to be increased by 456 billion dollars, raising the total funds to more than 1 trillion dollars. Eurozone countries have pledged 150 billion dollars in additional bilateral loans. The United States has declined to increase its contribution.
Industrializing countries are linking their increased IMF contributions to a reallocation of IMF voting rights. Quota reforms agreed to in 2010 and aimed at changing the relationships between older and newer economic powers was to have been in place by the autumn of this year. However, implementation of the voting reforms has been delayed.
The reforms would mean that China, the world's second-largest economy after the US and ahead of Japan, would push Germany out of third place among IMF shareholders.
Global imbalances among the economic powers are a constant theme of discussion. China and Germany are under fire because of their long-running trade surpluses with critics saying they are doing too little to stimulate domestic demand and private consumption.
Exchange rates/capital transfers
China could be called on once again to ease controls on its currency. The US and the Europeans in particular accused China of keeping the value of its currency artificially low with the aim of securing an export advantage.
Hosts Japan could bring the strength of the yen up for discussion. Tokyo was hoping that the leading industrialized nations of the Group of Seven, who are to meet on the sidelines of the IMF and World Bank meetings, would help Japan lower the value of its currency and boost its lagging economic recovery.
The yen continued to be seen as a "safe haven" currency despite Japan's soaring national debt of 230 to 240 per cent of its gross domestic product.
Developing countries are also battling rises in the value of their currencies as "cheap" money from the industrialized world seeks investment opportunities.
The conflict between China and Japan over a group of uninhabited islands in the East China Sea threatens to overshadow the Tokyo meetings. At the last minute, China said its finance minister and central bank head would not be attending. A Japanese government spokesman expressed regret at the decision.
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