As they prepare for the summit of the group of the world’s 20 biggest economies in London on April 2, leaders of industrial nations must quickly work on a plan to provide large-scale financial assistance to avert an economic catastrophe in the developing world, said New York Times in an editorial yesterday. Excerpts:
The economic news is so frighteningly bad here, it has all but squeezed out reports of the turmoil wrecking the developing world. The news there, if possible, is even more frightening. And in a globalized economy there is no insulation for anyone. The emergency spreading through Eastern Europe has sent currencies plunging in financially stretched nations like Hungary and solid economies like Poland. The crisis threatens political stability along the European Union’s eastern border. The government in Latvia fell last week following protests. Ukraine is on the brink.
Over the weekend, the European Union’s wealthy members rejected calls for a bailout of its poorer members. Collapsing economies in Eastern Europe — including inside the European Union — could bring down the banks in the West that lent to the East. Such turmoil should serve as a warning about the perils of ignoring the disasters unfolding across the developing world — and the need for a global response.
Poor countries remain the world’s only hope for economic growth this year, but that’s dimming as they are walloped by collapsing exports and the shutdown of foreign finance. Currencies are plunging from Mexico to Malaysia as lenders and investors pull money out to park it in United States Treasury bonds. Pakistan, Iceland, Turkey and El Salvador, along with several Eastern European countries, have already asked the International Monetary Fund for help to pay foreign creditors.
Helping the developing world is within reach, but it will require capital and concessions from rich countries. The United States and Europe should drop their resistance to a vast new issue of special drawing rights — which like newly printed dollars by the Federal Reserve act as the International Monetary Fund’s own currency.
