G-20 Summit balks at IMF funding

Despite efforts to devise a specific plan of action to establish a global financial safety net at the recent Group of 20 meeting in Cannes, France, the leaders of major economies were not able to settle on any precise measures to help restore overall market confidence.

“The G-20 Summit was only a qualified success,” Shin Je-yoon, Korea’s vice finance minister, was quoted as saying by Yonhap News Agency on Saturday.

“Though the meeting was surely meaningful in that the leaders agreed on a deadline for measures [to boost IMF funding] before the G-20 finance ministers’ meeting in February, there were no specific numbers on new funds at the recent meeting.”

President Lee Myung-bak called for G-20 leaders to come up with specific steps to restore the fiscal health of each of their governments while strongly urging debt-stricken countries like Greece to promote restructuring measures to bring the crisis under control.

“Crisis-hit nations need to carry out thorough restructuring and self-rescue efforts,” Lee said. “Korea also overcame the Asian financial crisis in the late 1990s through bone-carving restructuring.”

Lee also called for more active participation from the private sector, urging global companies to expand investment and increase hiring to boost the world economy.

Despite hopes that Korea and its leadership would help solidify measures seriously tackling the euro zone debt crisis, its active role in the recent economic forum was not enough to produce tangible results.

Lee expressed Korea’s support for a proposal to boost the IMF’s resources in order to better manage future crises and prevent them from spreading, but G-20 leaders were not able to settle on a timetable or any specific figures.

The leaders simply agreed in principle to increase the volume.

With leaders of these major industrialized nations leaving empty-handed, and all eyes nervously watching Greece’s economic crisis evolve into a political one, Vice Finance Minister Shin expressed concerns that the euro zone crisis could drastically affect long-term economic outlooks, including Korea’s export-driven economy.

“Korea should prepare in advance for the expected drop in the overall trade volume by expanding its free trade agreement networks while also boosting its domestic economy by expanding the service sector,” Shin said.

The vice finance minister also noted that Korea should place more importance on the growing influence of the Chinese economy.

“The question companies should ask is how they could target the massive Chinese domestic market in the changing environment,” he said.

At the G-20 Summit, China decided to promote greater exchange rate flexibility of its yuan and gradually reduce the pace of accumulation of its foreign reserves while also pledging to increase domestic demand.

The relationship between the United States and China has been tense as the United States has argued that China has kept its currency artificially low to boost exports.

By Lee Eun-joo [angie@joongang.co.kr]