Gloom deepens as G20 leaders head for summit in Washington

Turkish Prime Minister Tayyip Erdogan arrived in the United States to represent his country in the meeting of Group of 20 leaders.Â

 

The world would sooner or later weather the economic crisis through the help of international cooperation, Erdogan told a conference at Columbia University in New York.   Â

The global financial crisis reminded the world that all countries were passengers aboard the same ship and that they did not have the luxury to fight each other and capsize the ship, he said.

Erdogan said the G-20 meeting, in which world leaders were gathering Friday and Saturday in Washington to deal with the global financial crisis, was a reflection of this reality.Â

"Doubtlessly, this financial crisis would pass off sooner or later by the help of international measures taken in cooperation. But there are also awaiting complicated political issues which are ready to explode as resources of crises. We have to see them too," the Anatolian Agency quoted him as saying.

Erdogan also said the biggest part of the responsibility to overcome the recent crisis belonged to G-20 countries which represented 90 percent of the global economy, 80 percent of global trade and two-thirds of the world's population.

Besides the United States and Turkey, the countries represented at the White House dinner Friday and meetings on Saturday will be Argentina, Australia, Brazil, Britain, Canada, China, France, Germany, India, Indonesia, Italy, Japan, Mexico, Russia, Saudi Arabia, South Africa and South Korea. Those countries and the European Union make up the so-called G-20.

 

MARKETS GLOOMY

Markets, however, were less gloomy. After three days of losses, stocks in Asia were broadly higher following a wild day on Wall Street that saw U.S. shares gain nearly 7 percent. Oil held onto gains after hitting a 22-month low on Thursday. Â

 

Hopes were muted that leaders of the largest industrial nations and large emerging economies such as China and Mexico would come up with major new initiatives at a meeting this weekend hosted by U.S. President George W. Bush.

 

"This will need to be seen as just the starting point," Mexican President Felipe Calderon told reporters in Mexico City. "There will be results, but they will be moderate," he was quoted by Reuters as saying.

 

Bush has pressed to keep the focus of the gathering on ways to spur growth rather than scrutiny of the inadequacies of U.S. regulation, which European officials see as the root cause of the financial storm that has swept the world and pushed economies into a punishing downturn.

 

The Organization for Economic Cooperation and Development (OECD), the International Monetary Fund and the World Bank have all forecast advanced economies will contract next year.

 

Emerging economies are suffering as well. China reported capital spending on Friday that was slightly lower than expected, the latest in a series of indicators pointing to slowdown for the world's fourth-largest economy.

 

Hong Kong data later in the day might show the territory slipped into recession in the third quarter, many economists say. Others say it might just avoid recession for now.

 

Official growth figures due on Friday are expected to confirm that the 15-country euro zone is in the first recession of the European Central Bank's 10-year history, a day after Germany said it was in recession.

 

Other countries, including Ireland, New Zealand, Singapore and Estonia, have reported their economies are in recession.

 

Japan reports third-quarter economic growth figures on Monday. Economists have forecast the figures will show the economy just skirted recession in the third quarter.

 

Toyota Motor Corp, which stunned investors last week when it cut its operating profit forecast by 63 percent amid a deep slump in the U.S. auto market, is considering postponing the start of production at a plant it is building in Mississippi to 2011 or later, the Nikkei business daily reported.

 

A $25 billion bailout plan for the ailing U.S. auto industry, meanwhile, may not have enough votes to be approved by Congress this year, Senate Banking Committee Chairman Christopher Dodd said on Thursday.

 

The United States said it started off its fiscal year with a record -- and unexpectedly high -- budget deficit of $237.18 billion in October as financial bailout costs piled up. In October 2007, the deficit was $56.84 billion.

 

STOCKS RALLY

Despite a firmer tone in markets, dealers were wary given such pervasive economic gloom. Stocks in Tokyo gained 2.7 percent and elsewhere in Asia were up by 1.9 percent.

 

"You might have seen the initial euphoria, but nothing has really changed from yesterday. The negativity is still about," said Dominic Vaughan, senior dealer at CMC Markets in Sydney.

 

After a series of big rate cuts by central banks to spur growth, the OECD said more governments should provide an extra boost to their economies by way of fiscal stimulus in the form of tax cuts or increased government spending.

 

U.S. President-elect Barack Obama is advocating a second U.S. fiscal package and help for American carmakers, Japanese politicians are debating the details of a pump-priming plan and the British government is expected to follow suit in its pre-budget report later this month.

 

China unveiled a $586 billion spending package to boost its economy last weekend. On Friday, China gave its strongest indication yet that it was ready to help the IMF bail out countries hit by the global crisis.

 

"We will actively participate in rescue activities for this international financial crisis," deputy central bank governor Yi Gang told a new conference in Beijing.

 

The G20 summit falls at an awkward time politically as Bush prepares to leave office. He traveled to Wall Street on Thursday to outline his views on the financial markets.

 

Bush defended free markets, but acknowledged there should be some reforms to correct the problems that led to the global financial crisis.

 

"While reforms in the financial sector are essential, the long-term solution to today's problems is sustained economic growth," Reuters quoted the president as saying.