DALIAN, China // Global leaders should hold an emergency summit next week to prevent the world sliding back into recession, leading economists said at the World Economic Forum yesterday.
The call to bring forward the Group of 20 summit, now set for November, came amid deepening fears over the survival of the euro and growing chaos on currency and stock markets.
"You only have so much time to work out of a crisis or it becomes uncontrollable and the losses substantial," said Bill Rhodes, a senior adviser to the World Economic Forum. He proposed that the IMF meeting scheduled for September 24 be converted into a heads-of-government summit.
"Instead of having finance ministers and central bank heads in two weeks in Washington, we should do something with the heads of state, because they have the ultimate power. These are decisive moments for where the world economy is going to go and timing is of the essence."
The move to bring forward the G20 meeting was also backed by Victor Halberstadt, a Dutch economics professor who sits on the fiscal crises council at the World Economic Forum.
Greece faces a test this week of whether its efforts to cut spending and raise taxes meet the criteria for a second European payout. Without it, the government will run out of money next month and default on debt payments, threatening to break up the euro zone.
Fears of a Greek default have infected French banks, which top the list of creditors with US$57 billion (Dh209.33bn) in exposure. Moody's downgraded two lenders, Crédit Agricole and Société Generale, yesterday and put the sector under review due to tightening credit markets.
The IMF is still expecting the world economy to show a modest recovery this year, but Min Zhu, a deputy managing director speaking at the same forum, said the risk of a downturn was growing.
"Undoubtedly, this is a key moment and if the governments fail to adopt effective measures it is still possible for us to slide into recession," he said.
Earlier in the day, Wen Jiabao, China's premier, had stern words for European leaders.
"Governments should fulfill their responsibilities and put their own house in order," he said at the forum, which is also known as the "Summer Davos".
Mr Wen offered to buy more euro-denominated bonds, but said the priority was for governments in the 17-nation bloc to stop contagion.
Beijing is sitting on savings worth $3.2 trillion, but Mr Wen made clear that China could not be expected to bail out Europe or the global economy. Fears over a Greek default have wiped hundreds of billions of dollars off world stock markets in the last month and caused havoc in currencies.
Vincent Van Quickenborne, a Belgian cabinet minister, said the Greek crisis had exposed flaws at the heart of the treaty, signed in Maastricht in 1992, that created the single currency.
"We need unity or divorce and divorce will come with a huge risk. It's like opening Pandora's Box," he said, advocating a "United States of Europe" with a single finance minister and single bond market.
Victor Chu, the chairman and chief executive of First Eastern Group, said his hunch was that Athens would ultimately fail to meet the terms of the European bailout.
"So far we have muddled through but now I think we come to face the ultimate. My hunch is that Greece will not deliver," he said.
Mr Rhodes, who helped to design the so-called "Brady plan" that solved Latin America's debt crisis in the 1980s, said history showed that austerity alone could not solve Europe's problems.
"To get out of the crisis you've to get back to the markets … You can't just do it on austerity measures, although they are necessary," he said.
"You've got to show a population there is growth at the end of the tunnel and that is why the Brady plan was a success."