Analysis: Years of weak growth sow doubt in economic rescue plans

Sun Apr 21, 2013 1:22pm EDT
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By David Gaffen and Jason Lange

WASHINGTON (Reuters) - More than three years after the end of the global recession, sluggish activity across rich and poor economies is confounding policymakers who expected more by now and raising concerns that options for kick-starting growth are increasingly limited.

They face a sobering checklist:

The U.S. economy remains shackled by a mountain of household debt and continues to whipsaw between periods of modest growth and next to none at all.

The euro zone is mired in recession, lurching from crisis to crisis and now dealing with the latest trouble spot in Cyprus.

And even such star performers as China and Brazil have run low on gas. China in 2012 posted its weakest year of growth since 1999. Brazil's economy slowed to a near standstill; at the same time, it faces a growing threat from inflation.

Against this backdrop, the exasperation of finance ministers and central bankers attending last week's Group of 20 and International Monetary Fund meetings was palpable. The official communiques and sideline discussions reflected their frustration over the failure so far to deliver an effective mix of policies to finally get an upper hand on a long-lasting crisis that shows little sign of ending.

"We cannot unmistakably declare that the worst is behind us," Brazilian Finance Minister Guido Mantega said on Friday. "There is a risk of a prolonged crisis, despite all our efforts in the G20 and other international forums."

Central banks across the developed world have held interest rates at rock-bottom levels since 2008 while pumping more than $6 trillion into their banking systems through loans and asset-purchase operations known as quantitative easing, or "QE." The European Central Bank has helped lower borrowing costs for the governments of Spain and Italy. Ireland, Portugal and Greece have been bailed out.   Continued...

Finance ministers and central bank governors from the G20 arrive for a family photo during the 2013 Spring Meeting of the International Monetary Fund and World Bank in Washington, April 19, 2013. REUTERS/Yuri Gripas