Finance ministers and central bank governors from the G7 nations announced yesterday the global economic recovery is under way, but stressed rising oil prices and economic crises like the one that forced Argentina to default on its $141-billion foreign debt in December remain as splinters of instability.
Finance officials from Britain, Canada, France, Germany, Italy, Japan and the United States also agreed to work together to help stem the flow of money to terrorist organizations. Their two-day meeting wraps up today.
"There are clear signs that the recovery is under way in different ways, in different countries," said Canadian Finance Minister Paul Martin. "These signs warrant optimism."
A great concern at the meeting in Washington was the crisis facing Argentina. Martin told reporters Canada has fully endorsed the proposal put forward by the International Monetary Fund to help prevent such a financial crisis from occurring in developing countries.
The new plan, Martin said, attempts to make financial restructuring of debt easier on indebted states by introducing a cooling-off period during which debt would be rescheduled, by setting out new guidelines for how that debt will be repaid and setting further guidelines for reinvestment.
"Had we arrived at this plan four years ago Argentina wouldn't be in the situation it is in today," Martin said. "We've been dealing with a great tragedy within Argentina and this new plan is the best way to ensure that when new money goes into Argentina it will help the people who most need it."
With Bank of Canada Governor David Dodge at his side, Martin told reporters Canada intends to push other G7 nations to help avoid further foreign debt defaults by encouraging new forms of debt relief for developing nations.
Dodge said the low Canadian dollar was not discussed at the meetings with other finance ministers but noted exchange markets have helped Canada to recover during the most recent economic slowdown.
Dodge stressed, however, that rising oil prices caused by instability in the Middle East will continue to threaten the recovery by affecting markets in Canada and in developing countries.
"If there's a cloud on the horizon it's linked to the threat of rising petroleum prices," Dodge said. "If we were to see prices in the mid to upper 30s (per barrel) for a sustained period of time it would exacerbate the debt problems of countries like Argentina and Brazil."
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