Grand bargain to rescue global economy seen unlikely at G20 meet

Wed Feb 24, 2016 3:00am EST
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By John Ruwitch and Pete Sweeney

SHANGHAI (Reuters) - Investors hoping for a grand plan from the world's top financial officials to stabilize shaky markets are set for disappointment, insiders say, when finance ministers and central bankers gather this week in Shanghai to discuss the troubled global economy.

Stubbornly weak demand, falling equity markets and currency volatility pose a challenge to the Group of 20 (G20) major economies that some are comparing to its April 2009 meeting, at the height of the global financial crisis, when ministers agreed on coordinated stimulus to avert a worldwide depression.

Many G20 members are urging stimulus and better policy coordination, but with no convergence about what to do a deal along the lines of the 1985 Plaza Accord, which reversed a detribalizing surge in the dollar, appears unlikely.

"Financial markets need something refreshing, but we are not expecting a 'Plaza'-like policy accord," said a Japanese official. "There's no magic bullet."

With divergent monetary policies exacerbating currency market volatility, China, the G20 chair in 2016, has said strengthening policy coordination and reducing "negative spillovers" from domestic policy measures was a "pressing task".

Others, including the United States and Japan, are planning to urge G20 states to do more to counter market turmoil and use fiscal policy to support the global economy.

"The global picture is less rosy than it was a year ago," said an Italian official, who declined to be identified, adding the Feb. 26-27 meeting was "unlikely to produce any short-term crisis responses".


An investor watches an electronic board showing stock information on the first trading day after the week-long Lunar New Year holiday at a brokerage house in Shanghai, China, February 15, 2016. REUTERS/Aly Song