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28 May 2024

'Action needed, not mere words'

By Reuters

Enough talking. Do something. That sentiment is apparent in the chilly reception to US Treasury Secretary Timothy Geithner's plan to repair the banks, and in the way consumers are balking at buying cars, houses or just about any other expensive goods.

It shows up in the depressed share prices of financial firms, and in the steep drop in business investment and hiring across many parts of the developed world.

Consumer, business and investor confidence remains in tatters even though governments have promised trillions of dollars to fix the financial mess. The underlying reason seems to be frustration at the slow pace of progress, and the global economy cannot recover until that attitude is reversed.

Dominique Strauss-Kahn, head of the International Monetary Fund, said that was the gist of his message to finance leaders from the Group of Seven rich nations, who gathered in Rome over the weekend.

"What you prepared is OK, in most cases, so just do it," he said, urging countries to move ahead with economic recovery plans before the recession gets any worse.

Figures due this week are likely to show that sentiment remains decidedly negative among Japanese manufacturers, German analysts and investors, and US consumers.

Recent readings from Germany's ZEW think-tank and the US ABC consumer confidence survey showed tentative signs of stabilisation in January, albeit at very low levels. Still, Japan's Reuters Tankan survey hit a record low last month and today's report may not indicate any improvement. The stock markets sell-off that greeted Geithner's bank rescue plan is another example of the confidence gap.

"The policy playbook is simple: don't promise more than you can deliver, don't promise big programmes without explaining how they will work, and don't outline how bad the economy is unless you immediately offer a clear, credible turnaround plan," said Ethan Harris, an economist with Barclays Capital in New York.