The G7 major economies have pledged to do “whatever is necessary” to stabilise a global economy shaken by the coronavirus pandemic, with its leaders vowing to co-ordinate recovery plans in the face of a possible worldwide recession.
In a statement following a call between the leaders of the US, Canada, France, Germany, Italy, the UK and Japan, the G7 said they would press their central banks to support the financial system and hold weekly finance ministerial meetings to determine additional measures that would be needed.
The leaders said the pandemic, which has seen entire industries such as hospitality and aviation grind almost to a halt, was not only a human tragedy but also posed “major risks for the world economy”.
“We resolve to co-ordinate measures and do whatever it takes, using all policy tools, to achieve strong growth in the G7 economies, and to safeguard against downside risks,” they said.
Investors have thus far been unimpressed with the large-scale measures taken by the US Federal Reserve and other global central banks to ensure the financial system remains liquid, and many said they are awaiting to see what kinds of fiscal stimulus emerges from the US and European governments.
Although the statement did not commit the G7 to co-ordinated fiscal spending, it noted the leaders were “mobilising the full range of instruments, including monetary and fiscal measures, as well as targeted actions, to support immediately and as much as necessary the workers, companies and sectors most affected” by the pandemic and the economic fallout.
Asked at news conference in London about whether he advocated a large-scale fiscal stimulus, Boris Johnson, the UK prime minister, said he preferred a global response and that governments were working on a way forward.
“If we do things jointly I think the global markets will understand we are all operating on the same fiscal framework,” Mr Johnson said.
Giuseppe Conte, Italy’s prime minister, said the rest of Europe would follow the “Italian model” in responding to the crisis and unveiled a €25bn spending package to shore up the health system and safeguard jobs. Italy last week became the first G7 member to impose draconian social distancing measures on its population.
“We can speak of an Italian model not only for the strategies to fight the virus but also of an Italian model for the strategy of economic response,” Mr Conte said.
The worldwide bill for rescuing troubled businesses is likely to reach into the hundreds of billions. US airlines alone are asking the White House and Congress for $50bn in aid, as they tell the Trump administration that they faced possible bankruptcy by the end of the year.
Shortly after the statement was released, Justin Trudeau said Canada would close its borders to everyone except Canadian and US citizens. The move joined other G7 countries in severely limiting international travel, including Germany, which closed its borders, and the US, which has banned most travel by non-citizens from Europe. Italy and Spain have gone into lockdown.
The G7 said the crisis required a “strongly co-ordinated international approach, based on science and evidence, consistent with our democratic values, and utilising the strengths of private enterprise”.
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The leaders said they would marshal the “full power” of their governments to co-ordinate public health measures, restore economic confidence, support global trade and investment, and encourage research and development to address the crisis.
“By acting together, we will work to resolve the health and economic risks caused by the Covid-19 pandemic and set the stage for a strong recovery of strong, sustainable economic growth and prosperity,” the G7 added.
Daniel Price, a former top White House international economic adviser in the George W Bush administration, said the statement underscored that the G7 understood that the coronavirus crisis required the same kind of cohesive and collective response that occurred during the height of the global financial crisis in 2007 and 2008.
“If the terms of this G7 statement are actually fully implemented, it should diminish market uncertainty resulting from uncoordinated actions, perceived complacency about needed fiscal measures, or from ‘beggar thy neighbour’ responses restricting flows of healthcare supplies,” said Mr Price, now at Rock Creek Global Advisors.
Follow Demetri Sevastopulo on Twitter: @dimi
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