By Chris Cermak Oct 4, 2009, 14:20 GMT
Istanbul - World finance ministers on Sunday tasked the International Monetary Fund (IMF) with watching over their economies and developing principles for governments to begin withdrawing state support measures in place to weather the global economic crisis.
But the IMF's steering committee, made up of 25 finance ministers who met in Istanbul, also said that massive fiscal and monetary measures should remain in place until a 'more durable' global recovery takes hold.
The Group of Seven (G7) industrial powers made a similar pledge to keep up public spending for the time being. They warned that the recovery remained 'fragile' and unemployment was still rising, after a meeting of their finance ministers on Saturday.
IMF Managing Director Dominique Strauss-Kahn said the world's worst economic crisis in decades could be over within a year. He linked its end to the drop in jobless rates, which have continued rising in the US and Europe even as they pull out of recession.
Strauss-Kahn said he believed unemployment would begin falling in 10-12 months, at which time 'the crisis will be behind us.'
Governments have invested hundreds of billions of dollars into their economies over the past year in an effort to head off the worst global recession since World War II. How long those measures should remain in place has been a key question for policymakers.
Finance ministers said the IMF would create 'principles for orderly and cooperative exit strategies' by its next meeting in April.
The ministers also backed a greater role for the IMF in monitoring the economies of the world's 20 major powers, in an attempt to avoid future crises by bringing about more balanced growth to the global economy.
The IMF 'needs to establish itself as the main engine of coordination of policies across the world,' said Egyptian Finance Minister Youssef Boutros-Ghali, who chairs the IMF's International Monetary and Financial Committee.
Leaders of the Group of 20 (G20) last month agreed the IMF should play a key role in helping them better coordinate their economic policies.
But as the IMF's steering committee met in Istanbul, a battle was brewing over how much extra say developing countries should get in global financial institutions.
Brazilian Finance Minister Guido Mantega said the IMF was 'ill-prepared' to deal with the past year's economic crisis and said 'much remains to be done' to make the IMF more representative.
The IMF committee endorsed a proposal by the G20 to work towards shifting voting rights by at least 5 per cent towards developing powers by January 2011. Brazil, India, China and other emerging countries say they want a 7-per-cent shift.
Europe has been especially resistant to giving up influence over the IMF and World Bank, which have long been dominated by industrial nations. US Treasury Secretary Timothy Geithner also said he considered 5 per cent a 'substantial shift' in voting rights.
Finance ministers said ahead of the meeting that they were committed to doing what it takes to keep a tentative recovery of the global economy alive.
Joaquin Almunia, the EU's economic and monetary affairs commissioner, said the economic crisis of the past year had lowered the growth potential of the world's wealthy nations.
'The worst of the crisis is probably behind us, but there is no room for complacency,' he said. 'The crisis has left some lasting damage and in the coming years growth is likely to remain relatively subdued.'
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