Published: Tue, 17 Mar 2009 21:42:28 +0100

BOE's King Says Stimulus, Banks Should be Focus of G20

(CEP News) - Bank of England Governor Mervyn King said Tuesday that the focus of the upcoming G20 meetings in London should be fixing the banking system and providing significant stimulus to combat the economic downturn.

"The immediate need is to deal with the extraordinarily steep and simultaneous downturn in so many economies around the world, and to stabilize the banking system in those countries where it has failed," King said in his prepared remarks. "That should be the main priority at the forthcoming G20 summit."

The central banker went on to say that a joint commitment to stimulus is what is needed, echoing comments from U.S. administration officials and others. King also said the G20 needs to help poorer nations to borrow, either through the IMF or through global capital markets.

Looking ahead, King stressed the need for an exit strategy once markets have stabilized and growth has returned. "There needs to be a clear exit route by which the extraordinary level of official financial support will be unwound as conditions return to normal," he said. "At some point, central banks' balance sheets will have to contract."

By Ernest Hoffman, ehoffman@economicnews.ca, Sarah Sussman, ssussman@economicnews.ca