Recession risks to vex G20 leaders
Updated: 2011-11-02 07:53
By Zhang Haizhou (China Daily)
LONDON - Fears of another recession are likely to overshadow the upcoming G20 meeting among leading economic powers in Cannes, France, on Thursday and Friday.
In the days leading up to that event, analysts were saying they are skeptical and pessimistic that leaders will be able to come up with "a cohesive plan" to fight recession. Meanwhile, the Organization for Economic Cooperation and Development, which works to promote the well-being of people around the world, reduced on Monday its forecast for the growth of eurozone economies.
Didier Cossin, professor of finance and governance at the IMD Business School in Geneva, said the risk of a "double-dip recession" occurring in Europe and in the world is "a governance problem, and not an economic" one.
"Obviously there is risk, but whether a double-dip recession happens or not depends on political leaders' ability to make decisions from the top," Cossin said, adding that the European Union "has not shown great governance skills".
Greece's troubles, for example, could have been overcome "a long time ago if decisions had been made quicker", he said.
After rounds of debate, the European Union, composed of 27 countries, devised its latest plan to rescue Greece this past week, long after the country's debt crises began.
"The European economy needs major restructuring for some of its countries," Cossin said.
He added, though, that "implementing such decisions requires strong political will. But, overall, it is difficult to ensure compliance from different governments."
Similarly, the Organization for Economic Cooperation and Development earlier this week called for "decisive action" to be taken to avoid an economic slump, as it predicted that the growth of the eurozone's economy will come nearly to a halt next year, showing an increase of a mere 0.3 percent.
It also warned that some eurozone countries could see their economies contract by as much as 5 percent in the first half of 2013, especially if EU leaders fail to restore confidence in those economies and the debt crisis worsens.
The Organization for Economic Cooperation and Development meanwhile reduced its forecast for the United States' economic growth next year, saying it is likely to be 1.8 percent rather than the 3.1 percent it had previously predicted.
The organization's report also said China is likely to say farewell between 2011 and 2013 to double-digit economic growth. The report said the country's economy is likely to grow by 8.6 percent next year.
In the United Kingdom, although the economy grew slightly more than expected in the third quarter by 0.5 percent according to the Office for National Statistics, but there is wide fear the country may still slip into recession.
"We never left a recession," said Stephen Gallo, head of market analysis at the London-based financial service provider Schneider Foreign Exchange.
"Although we do not have negative growth rates, it does not mean that our economy is healthy," he said. "This can be shown through the lack of business confidence, consumer confidence, investment decisions made, and a slowing real rate of growth in relation to nominal rate of growth."
Gallo was pessimistic about G20 leaders' ability to improve the global economy. "Currently the US, the EU and China all have different problems," he said. "There may be a lot of bickering at the G20 and it is hard to say if G20 leaders can come up with a cohesive plan at all."
Stuart Fleming, an associate fellow at London's Royal Institute of International Affairs, has compared the G20 Summit that is to take place this week to the London summit held in April 2009.
The objective of the London summit was to halt the downward spiral in world economic growth started by US debt troubles and the bankruptcy of Lehman Brothers.
"This time, the objective is to put in place new initiatives that seek to prevent Europe's sovereign debt crisis from tipping the transatlantic economies into a double-dip recession, perhaps triggering a global slump," said Fleming.
Cecily Liu contributed to this story.