Global Financial Summit May Endorse Increased Government Spending

As leaders of leading developing and advanced economies prepare to meet in Washington November 15 to discuss weakening conditions in the global economy, there is an expectation that they will endorse increased government spending to maintain economic growth. VOA's Barry Wood has more.

Charles Dallara, who heads an association of global financial institutions, says it is extraordinary that leaders have agreed to meet on such short notice. He says the Washington summit symbolizes the seriousness with which leaders view the financial crisis.

"The first thing we would hope to come out of it would be a clear message of their commitment to coordinate financial, economic and monetary policies with a view towards continued stabilization of the current market environment, because we're still not back to normal," said Charles Dallara.

Fred Bergsten, the respected director of the Peterson Institute for International Economics, says it is essential that the leaders avoid controversy and discord. He is hopeful that the summit will agree to coordinated fiscal stimulus that would prop up a dramatically slowing world economy.

"Given the immediacy of the need to counter what looks like a savage turn-down in the world economy, I would put that [fiscal stimulus] right at the top of the list," said Fred Bergsten.

Bergsten applauds the announcement that China is boosting government spending by $600 billion to maintain domestic consumer demand. European nations and the United States are also considering further measures to boost flagging demand. What is called the Group of 20 Summit includes Western European countries, North America, Japan as well as Brazil, Argentina, China, India, Russia, South Africa and others. Altogether the 20 nations account for 70 percent of global economic output.

Mike Mussa, a former chief economist at the International Monetary Fund, says through interest rate cuts the major economies have already demonstrated their capacity to act cooperatively.

"There is certainly the fact of a world-wide policy response to what is viewed as an increasingly threatening situation," said Mike Mussa.

The Washington summit is being held at the urging of the French and British, whose economies and banking systems have been hard hit by the freezing up of credit markets that began with mortgage loan defaults in the United States over one year ago. The summit, which has scheduled only five hours of formal discussions, will also discuss proposals to better regulate financial markets and improve the functioning of the International Monetary Fund.