World Bank Chief Urges Action to Prevent Global Currency War

The Chief Economist of the World Bank Kaushik Basu has urged Finance Ministers from the G20 nations to act swiftly to prevent a global curency war.

In an interview with Reuters Basu said that G20 Finance Minister meeting in Moscow on February 16 should take action to coordinate economic policies in order to prevent a global currency war throwing the world back into economic crisis.

“We are not in a currency war but could be inching towards one,” said Basu, “Global leaders need to coordinate policy to prevent either (one) from happening or markets believing it is happening. Such coordination is entirely within the realm of the possible; all it needs is determination.”

Unconventional monetary policies in the US, Japan and Europe had proved valuable to revive growth, said Basu, reducing the risk of a return to recession. But he added that they had were also “beginning to feed into the global situation”.

Despite his warnings over the impending risks of currency wars (see World Currency War – The Facts for more info), Basu also sounded a positive note about the long term prospects of the global economy

“Eventually, I expect industrialized countries to go back to slightly higher growth, which for them is fine because they are already developed, and I expect some emerging economies to get back to between 8 and 9 percent growth, which they had before the global financial crisis,” he said.

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