Swiss see dark clouds at economics meeting

Doris Leuthard and Hans-Rudolf Merz spoke about the spring meetings to the media in Washington Keystone

The Swiss delegation to an international economics meeting in Washington has voiced concerns about progress in the finance markets – a key area for Switzerland.

This content was published on April 15, 2007 - 15:01

But Economics Minister Doris Leuthard said discussions had been overshadowed by the scandal concerning World Bank chief Paul Wolfowitz and called for a quick solution to the matter.

Leuthard and Finance Minister Hans-Rudolf Merz have been representing Switzerland at the three-day spring meetings of G7 finance heads, the International Monetary Fund (IMF) and the World Bank.

According to Merz and delegation member Jean-Pierre Roth, president of the Swiss National Bank, the positive picture painted by the IMF so far of the world economy was good news for Switzerland.

But there were still uncertainties in the financial markets, such as increased capital movements and problems in the granting of credit, they said on Saturday.

"All participants in the financial markets are showing a growing appetite for risk," Roth told reporters.

He said this was very worrying for Switzerland, whose economy is very dependent on the financial markets at 15 per cent of gross domestic product (GDP). A crisis could slow growth in the Swiss economy and even destabilise the Swiss franc, he added.

Wolfowitz scandal

For her part, Leuthard spoke of progress made in an action plan for Africa. But she said she regretted that the Wolfowitz scandal had "eclipsed" the other topics that were up for discussion.

Wolfowitz has been under pressure to resign after admitting helping his partner win a promotion and pay rise.

The United States continues to support Wolfowitz but other countries, many of them European, have questioned his position. World Bank employees have also called for him to go.

A World Bank meeting on the issue was ongoing on Sunday evening.

Leuthard, who was scheduled to attend the meeting, said it was important that the affair was discussed.

"This dossier has to be part of the meeting's agenda," the minister told swissinfo in Washington beforehand. "It's important that the World Bank's credibility does not suffer due to this affair."

Quick solution

However, Leuthard said it was important not to act hastily given Wolfowitz' good track record at the bank and the political implications of any decision.

Nevertheless, she called for a "quick solution" to the affair and pointed to the lack of confidence in Wolfowitz among his employees.

The World Bank head's mandate is due to expire in 2010 and there is currently no existing procedure for dismissal, said Leuthard.

The minister said that there had already been discussions about what could be done if Wolfowitz did not resign of his own accord.

Wolfowitz was due to hold a media conference after the spring meetings end on Sunday, it was reported.

swissinfo

Wolfowitz affair

The affair, which surfaced last week, dates from 2005. Three months after Wolfowitz was appointed head of the World Bank, his girlfriend Libyan-born Shaha Riza, was seconded to the US State Department to avoid creating a conflict of interest.

But rapid rises in her tax-free World Bank salary to about $193,000 (SFr235,000) raised questions about his involvement in the transfer. Riza was earning about $7,000 more than US Secretary of State Condoleezza Rice receives before tax.

Wolfowitz made a public apology over the matter on Thursday.

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Spring meetings

Speaking after IMF policy-steering committee meeting on Saturday, officials expressed satisfaction with the global economy but said more must be done to correct trade imbalances.

Finance ministers and central bankers said growth was expected to remain strong this year and in 2008, underpinned by solid economic foundations.

But they said vigilance of the world economy was needed in case there was a sharper than expected downturn in the US economy, the world's largest, and a revival of inflationary pressures if oil prices rebound.

In a separate statement, four governments, including the US and China, renewed promises to enact policies aimed at rebalancing global trade.

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