[PHNOM PENH POST]
GLOBAL policymakers held an emergency conference call yesterday to
discuss the twin debt crises in Europe and the United States that are
causing market turmoil and stoking fears of the rich world sliding back
into recession.
After a week that saw US$2.5 trillion wiped off
global stock markets, political leaders are under mounting pressure to
reassure investors that Western governments have both the will and
ability to reduce their huge and growing public debt loads. In
Washington, a White House economic advisor castigated ratings agency
Standard and Poor’s for downgrading the United States’ credit rating to
AA-plus from AAA on Friday, a move that over time could ripple through
markets by pushing up borrowing costs and making it more difficult to
secure a lasting recovery.
Washington’s Asian allies rallied
round the battered superpower, with Japan and South Korea both saying
their trust in US Treasuries remained unshaken.
South Korea said
finance deputies from the Group of 20 major economies discussed the
European debt crisis and US sovereign rating downgrade yesterday morning
in Asian time zones.
“I expressed our country’s position on the
[G20 conference] call that there will be no sudden change in our
reserve management policy,” South Korean Deputy Finance Minister Choi
Jong-ku said, referring to Seoul’s heavy ownership of US bonds out of
more than $300 billion in foreign reserves.
“There’s no
alternative that provides such stability and liquidity,” added Choi, who
declined to elaborate further on the G20 discussion.
The Group
of Seven leading economies agreed to hold an emergency phone meeting of
finance ministers and central bank governors on Monday, Kyodo news
agency reported yesterday.
A Japanese government source said it “would be normal” for the meeting to take place before Asian markets opened.
The
European Central Bank was scheduled to hold a rare Sunday afternoon
conference call. Investors are anxiously looking for the central bank to
start buying Italian and Spanish debt on Monday to stabilise prices, a
move that has split the ECB governing council.
French President
Nicolas Sarkozy, who chairs the G7/G20 group of leading economies,
conferred with Britain’s Prime Minister David Cameron on Saturday.
“They
discussed the euro area and the US debt downgrade. Both agreed the
importance of working together, monitoring the situation closely and
keeping in contact over the coming days,” a spokesman for Cameron said.
National
Bank of Cambodia Director General and spokeswoman Ngoun Sokha has said
she expected the international national community to rally behind the
US, given the dollar’s use as a reserve currency.
“The international community has an interest in preventing the US dollar from falling abruptly,” she told The Post.
Reached
by telephone yesterday, she reiterated previous statements that a
depreciated dollar would have both positive and negative affects on the
Kingdom’s dollarised economy. Exports and tourism would see growth,
while consumers would lose spending power.
She also said she
doubted Standard and Poor’s downgrade of the US would affect Cambodia’s
debt rating, which Standard and Poor’s had set at B+.
Standard
and Poor’s defines B-grade debt as speculative, saying a country with
such a rating is “more vulnerable to adverse business, financial and
economic conditions but currently has the capacity to meet financial
commitments”.
ANZ Royal Bank Chief Exectuvie Officer Stephen
Higgins said yesterday the effects of the US debt downgrade would ripple
out to Cambodia, though the Kingdom’s economy was “booming” at the
moment.
“I think inflation should be the principle concern for those managing the economy here,” he said.
Most
industries in Cambodia, especially those linked to Asia, would continue
to grow, he said. Rising wage inflation in China has led to increased
manufacturing in Cambodia, as plant owners look elsewhere for cheap
labour. Higgins doubted that trend would change despite troubles in the
US.
Cambodia is now much stronger than it was when the global
financial crisis struck in 2008, he said. The economy is less dependent
on the garment sector and there is no one industry overheating as
property did at the time.
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