ECB, IMF urge action to ensure 2010 recovery

World stocks at three-month highs and indications in parts of some economies that the slowdown is easing are fuelling hopes of a nascent recovery from the worst global downturn since the 1930s.

"Confidence today relies equally upon the audacity of our immediate decisions and upon the soundness of our exit strategies," ECB President Jean-Claude Trichet said in a speech in Tokyo.

He said banks would be the focus of any unconventional measures the ECB unveils next month.

The ECB is lagging the United States, Japan and Britain in moving beyond rate cuts to spur its economy and credit markets.

Central banks have begun buying debt from lenders in so-called "quantitative easing" aimed at freeing up banks to make more loans to companies and households.

Some investors worry, however, that huge cash injections by central banks could spark inflation in the future.

IMF Managing Director Dominique Strauss-Kahn, like Trichet, predicted a recovery from crisis in 2010 but warned that the global economy faced "deeply negative territory" this year.

"Solutions differ by country, but there must be a coherent and coordinated response by the international community," Strauss-Kahn said in Washington.
"Until this is done, attempts to restore demand are likely to falter."

A member of the Bank of England's Monetary Policy Committee, Danny Blanchflower, warned in an article published on Friday that Britain faced a "jobs crisis" this year.

"Unemployment is going to rise a lot during 2009," he said. "It is probably going to be the biggest issue at the next election."

Blanchflower has called for a further fiscal boost of close to 90 billion pounds ($133.6 billion) to tackle unemployment.

World stocks on Friday were on track for a sixth consecutive week of gains, with investors eyeing earnings due later in the day from U.S. bellwether companies Citigroup and General Electric.

Markets a day earlier cheered results from JPMorgan Chase and Google.

Near-term pessimism
Jean-Pierre Roth, chairman of the Swiss National Bank, also spoke of recovery next year but tough times in coming months.

"A true reversal of trend is unlikely to occur before next year and recovery will be a slow process, since the current difficulties are more than just cyclical," Roth said according to the text of a speech to be delivered at the SNB's annual general meeting.

His near-term pessimism chimed with central bankers in Britain, Japan and some in the United States.

"Japan's financial environment remains severe as a whole with more companies, regardless of their size, saying funding conditions and banks' lending attitude are severe," BOJ Governor Masaaki Shirakawa said in a speech.

On Thursday, the head of the Atlanta U.S. Federal Reserve forecasted a return to growth later this year, but the head of the San Francisco Fed warned of the potential for an even deeper contraction.

The Atlanta Fed's Dennis Lockhart said the U.S. recession would end by mid-year, with growth slowly picking up in the following months.

"I do expect the economic contraction we're now experiencing to give way to slow and tentative growth as early as the third quarter," he said.

The San Francisco Fed's Janet Yellen said: "While we've seen some tentative signs of improvement in the economic data very recently, it's still impossible to know how deep the contraction will ultimately be."