G8 to discuss exit strategy, long-term interest rates

Finance ministers from the Group of Eight (G8) nations will discuss long-term interest rates as well as how to unwind economic stimulus measures at this week's meeting, a Japanese Finance Ministry official said.

The official, who spoke to reporters in Tokyo yesterday, said bond yields will not be a major topic because they will be discussed in the context of the global economy.

Bond yields are rising around the world as governments increase borrowing to stimulate their economies and amid mounting signs the worst of the global recession is over. The G8 is unlikely to say that the increase in borrowing costs is a destabilising factor for the world economy, the official said.

At the meeting in Lecce, Italy, from tomorrow to Saturday, the G8 may also discuss how to unwind stimulus measures once their economies recover, said the official. While data show the global economy is beginning to improve, the outlook remains uncertain and the members may agree to continue to take steps to sustain a recovery, the person said.

The G8 will also discuss international financial institutions, financial regulation and oversight as well as climate change and food security, the official said. Protectionism may also be on the agenda, while flu probably will not be, he said.

US Treasury Secretary Timothy Geithner said the main goal of this weekend's meeting of Group of 8 finance ministers is to "take stock" of efforts to stimulate economies and stabilise financial systems.

Geithner told a briefing that efforts to ensure an economic recovery takes hold are "still the dominant preoccupation of policy everywhere" despite signs that the economic crisis may be starting to ease.

Geithner said he would discuss the US experience with stress-testing the capital levels of banks, but did not plan to judge other countries' standards for examining their banks.

"Mostly what I'll do is explain what we've done here, and I'd expect they will do the same," he said.

"They're going to make different judgments than we are partly because they are going to have different systems, different constraints and different opportunities and what matters to all of us, are they going to achieve enough? That's the standard we should be held to and that's the standard that I think we'll hold them to."

Geithner said he will underscore that the tests of the top 19 US banks provided a level of disclosure and clarity that has improved confidence in the United States financial system and attracted private investment flows into bank shares.

Canadian Finance Minister Jim Flaherty said earlier that the G8 ministers would continue to apply pressure for stress testing at the weekend talks.

 

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