Obama urges coordinated action on economy
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.”
Political squabbling in Europe over ways to prevent the debt crisis from spreading and delays in implementing agreed- upon measures are raising concerns about the risk of defaults by governments such as Greece, the International Monetary Fund said yesterday. The Washington-based IMF cut its global growth forecast and predicted “severe” repercussions if policy makers fail to stem the debt turmoil threatening to engulf Italy and Spain.
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
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.”
Central Bank Action
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.
Ten-year Treasury yields sank as much as nine basis points to 1.8525 and 30-year rates slid 19 basis points, or 0.2 percentage point, to 3.01 percent. Two-year yields climbed four basis points to 0.20 percent. The Standard & Poor's 500 Index tumbled the most in a month, losing 2.9 percent to 1,166.76.
Global Cooperation
In his public comments, Obama didn't specify what steps should be taken, while 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.
While the UN meetings were under way, central bankers and finance ministers began convening in Washington for this week's annual meetings of the IMF and World Bank.
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.