Officials agree sound policy is key to reducing international financial crises

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Finance ministers and central bank governors of the Group of 20 held their inaugural meeting on December 15–16 in Berlin. The Group of 20 is chaired by Canadian Finance Minister Paul Martin, and consists of the Group of Seven and 11 major emerging economies (Argentina, Australia, Brazil, China, India, Korea, Mexico, Russia, Saudi Arabia, South Africa, and Turkey), plus 2 institutional representatives (European Union and IMF/World Bank). Following are excerpts from a statement issued following the meeting.

Ministers and governors welcomed the improvement in global economic conditions. They reaffirmed the importance of continued progress by the World Trade Organization toward multilateral liberalization of trade in goods and services that would bring broad-based benefits to the global economy.

Ministers and governors discussed the role and objectives of the Group of 20 and ways to address the main vulnerabilities currently facing their respective economies and the global financial system. They recognized that sound national economic and financial policies are central to building an international financial system that is less prone to crises. They noted the importance of strengthening national balance sheets to help cushion against unexpected shocks. They encouraged steps to strengthen sovereign debt management and greater attention to the impact of various government policies on the borrowing decisions of private firms.

They recognized that unsustainable exchange rate regimes are a critical source of vulnerability and that a consistent exchange rate and monetary policy are essential. They discussed a range of possible domestic policy responses to the challenges of globalization and exchanged views on the role of the international community in helping to reduce vulnerability...