WASHINGTON >> Global finance officials are urging Greece to reach a deal with its creditors and avoid a catastrophic default that would stagger a world economy still emerging from recession.
U.S. Treasury Secretary Jacob Lew said a Greek default would “create immediate hardship” for that country and damage the world economy. Lew’s comments came in a speech Saturday to the steering committee of the 188-nation International Monetary Fund.
The policy committees of the IMF and the World Bank were wrapping up their spring meetings Saturday. Their discussions focused on ways to boost global growth and deal with threats such as a possible Greek default and potential market volatility once the Federal Reserve begins to raise U.S. interest rates.
Lew warned South Korea, Germany, China and Japan to do more to increase consumer demand in their own countries instead of relying on exports to the United States and elsewhere for growth.
“We are concerned that the global economy is reverting to the pre-crisis pattern of heavy reliance on U.S. demand for growth,” Lew said. “As we all know, such a pattern will not lead to strong, sustainable and balanced global growth.”
Mario Draghi, the head of the European Central Bank, which sets monetary policy for the 18-nation euro currency zone, told officials that the group’s economy was improving after the bank’s round of bond purchases to lower interest rates and foster growth.
Also helping was the significant drop in oil prices, he said.
“The economic recovery is expected to broaden and strengthen gradually,” he said.
Greece is in negotiations with the IMF and European authorities to receive the final 7.2 billion euro ($7.8 billion) installment of its financial bailout. Creditors are demanding that Greece produce a credible overhaul before releasing the money.
The country has relied on international loans since 2010. Without more bailout money, Greece could miss two debt payments due to the IMF in May and run out of cash to pay government salaries and pensions.
Fears that Greece could default and abandon the euro currency group sent shockwaves through global markets Friday. After being down nearly 360 points, the Dow Jones industrial average recovered a bit to finish down 279.47, a drop of 1.5 percent.
The negotiations over Greece’s debt have proved contentious. Greek officials said they planned to meet with creditors Saturday in a search for “common ground.”
Some finance officials expressed their frustration with Greece’s new left-wing government, elected in January.
Greece wasn’t the only country drawing criticism at the finance meetings.
China and Japan complained that the United States has yet to approve legislation needed to put into effect IMF changes that have been stalled for five years. They would expand the IMF’s resources to deal with financial crises and increase the voting power of fast-emerging economies such as China, Brazil and India.
Lew said he had assured his fellow finance ministers that the Obama administration believes it will soon overcome objections from Republican lawmakers and win congressional approval. The United States is the IMF’s largest shareholder and congressional approval is the last hurdle to putting the reforms into effect.
Chinese Vice Finance Minister Zhu Guangyao said in a speech Friday that the failure to pass the IMF quota reforms had damaged America’s image.
Growing frustration has caused other major countries to examine alternatives to break the stalemate in ways that might reduce America’s global influence.
As the largest shareholder, the United States is the only country that can veto key IMF actions.