The G-7 is in full panic mode. The organization for the prevention of harm to the Status Quo was expected to release a communique possibly over the weekend, but the speed with which one was dropped for mass circulation is stunning and confirms that its members are in full meltdown as the weekend comes. It is now certain that the G-7 will attempt some major intervention over the next 48 hours to inject a last dose of hope into capital markets, or else the Monday open will be an epic collapse.
G-7 Statement on Tackling Slowdown, Supporting Banks
“We met at a time of new challenges to global economic recovery, with significant challenges to growth, fiscal deficits and sovereign debt, stemming from past accumulated imbalances.
This is reflected in heightened tensions in financial markets.
There are now clear signs of a slowdown in global growth. We are committed to a strong and coordinated international response to these challenges.
“We are taking strong actions to maintain financial stability, restore confidence and support growth. In the U.S., President Obama has put forward a significant package to strengthen growth and employment through public investments, tax incentives and targeted job measures, combined with fiscal reforms designed to restore fiscal sustainability over the medium term. Euro area countries are implementing the decisions taken on July 21 to address financial tensions, notably through the flexibilization of the EFSF, reaffirming their inflexible determination to honor fully their own individual sovereign signatures and their commitments to sustainable fiscal conditions and structure reforms. Japan is implementing substantial fiscal measures for reconstruction from the earthquake while ensuring the commitment to medium-term fiscal consolidation.
“Concerns over the pace and future of the recovery underscore the need for a concerted effort at a global level in support of strong, sustainable and balanced growth. We must all set out and implement ambitious and growth-friendly fiscal consolidation plans rooted within credible fiscal frameworks.
Fiscal policy faces a delicate balancing act. Given the still fragile nature of the recovery, we must tread the difficult path of achieving fiscal adjustment plans while supporting economic activity, taking into account different national circumstances.
“Monetary policies will maintain price stability and continue to support economic recovery. Central Banks stand ready to provide liquidity to banks as required. We will take all necessary actions to ensure the resilience of banking systems and financial markets. In this context we reaffirm our commitment to implement fully Basel III.
“We reaffirmed our shared interest in a strong and stable international financial system, and our support for market- determined exchange rates. Excess volatility and disorderly movements in exchange rates have adverse implications for economic and financial stability. We will consult closely in regard to actions in exchange markets and will cooperate as appropriate.
“We look forward to working with our colleagues in the G20 and the IMF in the coming weeks to rebalance demand and strengthen global growth. As previously agreed, structural reforms will make an important contribution in this regard.”
Translation: the great experiment in encroaching statism, failed monetary policy and central planning continues... Until imminent failure.
And select soundbites of last ditch desperation courtesy of Reuters:
FRENCH FINANCE MINISTER FRANCOIS BAROIN
"The G7 reaffirmed its comittment to safeguarding the solidity of sovereign ratings."
"We have to get away from the idea there is only one solution for all... It's not rigour versus growth."
"It was a G7 where everything was raised. There was no dead time."
BANK OF FRANCE GOVERNOR CHRISTIAN NOYER
"There is an extreme tension on the markets, what's important is that very strong measures are taken by governments concerned."
"It was really a meeting of great cohesion and force. There was a determination by everyone to meet challenges."
"The G7 sees a need for a concerted effort at global level in support of strong, sustainable and balanced growth.
"We must all set out and implement ambitious and growth-friendly fiscal consolidation plans rooted within credible frameworks.
"The G7 affirmed its interest in a strong, stable international financial system."
U.S. TREASURY SECRETARY TIMOTHY GEITHNER
"It is completely within the capacity of the stronger members of the euro area to absorb those costs. Those costs would be much, much greater for them and their economies if they sit here and do nothing and they recognize that."
CANADIAN FINANCE MINISTER JIM FLAHERTY
"I hope we would all agree we have to stay the course, that we have to go through the pain of fiscal consolidation. It's not easy, it creates stresses in some countries, but it's necessary, we have to get through this rough patch.
"There's no point kicking the can down the road. If we don't deal with it now we'll have to deal with it later and we know that these problems do not get better with the passage of time."
EU ECONOMIC AND MONETARY AFFAIRS COMMISSIONER OLLI REHN
"We support the United States in its work so that the U.S. recovery can continue, while in Europe we have our own challenges related to fiscal consolidation and restoring confidence in the European economy."
On bank funding:
"Solutions should be found from private markets, from private investors and if that is not is possible there should be national backstops in place to ensure recapitalisations or restructuring for these banks."