Succesful G20 coordinated action after Cannes 2011 summit (as on €urozone 1st, 2008 pioneer Summit)

    "Coordinated", parallel moves by Financial Institutions all over the World, from EU and USA to China and Japan, etc, starting to apply Decisions recently taken by the "G-20" Heads of State/Government 2011 Summit at Cannes, (comp. "EuroFora"s NewsReports from the spot), apparently succeeded to create a strong Positive U-turn to Stock Markets Worldwide, including Europe, USA, etc., by using a similar method of action as that which had been initially adopted with Success by another exceptionally important Summit : That of "€uroZone"'s 1st, pioneer and voluntarist Heads of State/Governments' Summit at Elysee palace in Paris, back on October 2008, first part of a largely succesful fight against the Global Economic Crisis then, which evolved in the form of many, coordinated and parallel "Recovery" Plans in all €urozone Countries, (See "EuroFora"s NewsReport from Elysee, 10/2008+), leading to a positive Economic Revival result then.

    Both these "G20" 2011 and "€urozone" 2008 succesful Moves, respectively on Monetary issues and on Economic Recovery, occured while the relevant Organizations were chaired by French President Nicolas Sarkozy, in agreement with German Chancellor Angie Merkel, etc., and his main International Partners (this time including US President Obama, Chinese President Hu Jintao, etc), as he will probably remind in a forthcoming important Speech tomorrow, December 1st, scheduled at Toulon, near Cannes'2011 "G20" Summit's superb location, where Sarkozy is expected to unveal also the main lines of a Franco-German Plan to boost €urozone, just one day before German Chancellor Angie Merkel's awaited speech, at the Bundestag in Berlin, on the €uro and EU's December 8-9 Summit in Brussels, (See previous "EuroFora"s NewsReports, particularly from the recent Tripartite Strasbourg Summit between France, Germany and Italy, with Sarkozy, Merkel and Monti).

    The present "coordinated Central Bank action", which brought together the Banks of Canada, Japan, England, and the Swiss National Bank, as wel as the U.S. Federal Reserve, joined by the European Central Bank, is aimed "to address pressures in Global Money Markets", titles a Headline an ECB's Press Release sent this Morning under "Embargo" to Journalists including "EuroFora".     

    + To this was reportedly added "un unexpected cut in Bank Reserve requirements in China", due to boost its economy by stimulating domestic demand (See also infra) .    

 

    - "The joint action has shown extreme Efficiency and has been well received by the Markets", reportedly observed IMF's chief, Christine Lagarde. Stock Markts were, indeed, sky-rocketing already at the eve of the Global move, both in the EU and in the USA, etc., often with daily increases of more than +4%or even +5% in several hares. The operation aims to make easier access mainly to USA $, "easing strains in Financial Markets,  and thereby mitigate the effects of such strains on the Supply of Credit to Households and Businesses, and so help foster Economic Activity", according to ECB's anouncement.

    The Time Duration of the measures, which "lower the pricing on the existing temporary US dollar liquidity swap arrangements by 50 basis points", is extended to "all operations conducted from 5 December 2011" up to the beginning of "2013".

    + In addition, Non-USA Central Banks; (i.e. mainly European and Japanese) "agreed" to prepare and be ready also for supplementary "arrangements" for "liquidity .. in any of their currencies", if and whenever "market conditions should warrant so", even if, "at present, there is No need to offer liquidity in ...currencies other than the US $", but because they "judge it Prudent to make ..necessary arrangements so that liquidity support operations could be put into place quickly, should the need arise", eventually, sooner or later, before 2013.

    Finally, "the European Central Bank (ECB) decided, in co-operation with other central banks, the establishment of a temporary Network of reciprocal Swap Lines", which "will enable the Eurosystem to provide €uro ..., when required, as well as enabling the Eurosystem to provide liquidity operations, should they be needed, in Japanese yen, sterling, Swiss francs and Canadian dollars", (i.e. in addition to the above-mentioned US $ operation).

"Some specialists" were cited by certain Media saying that this was, partly, a "Similar" action to   previous attempts "to stabilize Global markets at the peak of the (USA-born) financial crisis in 2008", around the Lehman Brothers bancruptcy.

- But IMF chief Christine Lagarde stressed, on the contrary, that IMF ""will welcome the idea of attacking the crisis from its root and bring the necessary adjustments needed to restore confidence.". "We are prepared for this crisis not only for the benefit of the €uro area but also outside the European crisis, to help all members of the IMF," i.e. 187 Countries, she reportedly said.

Already, "IMF announced that it will collaborate in the joint action with the central banks as a tradition of the international body "to complement the measures they take in order to have a comprehensive plan."

+ But, moreover, as part of more Recent plans, "the IMF has designed a Line of credit or Liquidity Precaution, to help countries", Lagarde reportedly observed.
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Indeed, the latest, 2011 "G20" Summit's Official Communiqué's conclusions, already issued back on November 4 in Cannes, (Comp. "EuroFora"s NewsReports from the spot), stresses from the outset that the Heads of State/Government of some 35 big Countries and many International Organizations, (including also ECB, IMF, World Bank, etc), "have agreed on an ACTION PLAN for Growth and Jobs, to address (both) Short term vulnerabilities, and strengthen Medium term Foundations for Growth".

According to its Differentiated approach, "taking into account" the specific situation or stage of each Country, this G20 Action Plan also calls "Countries with Current Accounts Surpluses (f.ex. as China, etc), to ... Increase Domestic Demand, coupled with greater exchange rate flexibility", (i.e. f.ex. almost as Beijing has just decided to start doing : See supra).  While "Advanced Economies commit to adopt policies to Build Confidence and support Growth and implement clear, credible and specific Measures to achieve Fiscal Consolidation", as the same "G20" Action Plan adds, citting this time as example the "European leaders" decisions of "October 26", calling for their "implementation".

+ Moreover, the Cannes' G20 Summit decided also on "Common Principles for Cooperation between the IMF and Regional Financial Arrangements", including, f.ex. the European FSF, the ECB, etc., and "agreed" to "support the IMF in putting forward the New Precautionary and Liquidity Line (-PLL) to provide .... increased and more flexible Short-term Liquidity to Countries with Strong Policies and Fundamentals, facing Exogenous Shocks", as well as "in putting forward a Single Facility to fulfil the Emergency Assistance Needs of its members", "calling on the IMF to Expeditiously discuss and finalize both proposals".

>>> All G20's Heads of State/Government also decided to "Ensure the IMF continues to have (enough) Resources to play its Systemic Role to the benefit of its Whole Membership", and announced that they all "Stand Ready to ensure Additional Resources could be Mobilized in a Timely manner".

- However, despite describing several Positive moves in that direction, IMF's head Christine Lagarde had also joked,  by cautiously stressing that : - "I want to see my Money !", as she said then, in order to be sure, Smiling to Journalists present at her Press Conference in Cannes including "EuroFora", (See "EuroFora"s NewsReports from the spot).

For that purpose, the G20 Summit "ask(ed) ... Finance Ministers ... to work on deploying a Range of various Options, including Bilateral Contributions to the IMF, SDRs, and Voluntary Contributions to an IMF Special Structure, such as an Administered Account".

Such moves aim also "to allow the Financing of Regional Financial Arrangements" (including f.ex. European, etc) by "the IMF", which "did not have his capacity with its current instruments", official G20 Summit Explanatory Notes add here as comment.

This relates also to the above-mentioned "agreement" between "G20 Countries" "on principles of Cooperation between the IMF and Regional Financial Arrangements", with "Greater Coherence", able to "profit fully"  from both RFA's "Regional Focus" and IMF's "Global Vision". As well as to the "G20 Countries' ... "Support (to) the IMF Proposal for a "New Precautionary and Liquidity Line (PLL)", which will improve the Response to the Short-term Liquidity Needs of States which have Healthy Policies and Fundamentals, but which are hit by External shocks", reiterate the G20 Summit's official Explanatory Notes, under the Headings : - "Enhancing the Collective Capacity to Respond to Crises", and, in particular, "Strengthening Global Financial Safety Nets".

 

The pioneer and Voluntarist, 1st €urozone Heads of State/Government Summit of October 2008 (see Supra), had notoriously succeeded to immediately incite a Positive Welcome from Stock Markets then, (already Starting from the Next day : Monday morning), and was the First Strong Decision by Political Leaders to resolutely react  to Markets' spontaneous zig-zags. It triggered, moreover, a series of EU Decisions towards the same Direction, which resulted, later-on, by succeeding to bring soon an Economic Recovery in Europe, out of the brutal Recession whch had been provoked earlier by the US-born Glocal Economic Crisis. Meanwhile, given also the valuable Experience accumulated in various relevant issues since then, today, particularly shortly after the recent "G20" Heads of State/Government Summit of Cannes, at the beginning of this Month, (comp. "EuroFora"s NewsReports from both exceptional European and Global political events), the chances for succes should normally be greater now.

€uroarea Growth (in GDP)