WASHINGTON (Reuters) - The following are highlights of comments by finance ministers and central bankers in Washington this week for meetings of the Group of 20 and the semiannual meetings of the International Monetary Fund and World Bank.
CHINESE DEPUTY MINISTER OF FINANCE ZHU GUANGYAO ON EFSF, ESM:
"Before the next (G-20 Finance Ministers) meeting, Europe will make a clear decision on increasing the capital of the EFSF."
"We hope both the ESM (European Stability Mechanism) and the EFSF (European Financial Stability Fund) will work together to support the stability of Europe."
FRENCH FINANCE MINISTER FRANCOIS BAROIN ON FINANCIAL TRANSACTION TAX PROPOSAL:
"Tonight nobody can say that such a tax on financial transactions is not technically feasible. We are making progress on the technical coherence of this project".
JAPANESE FINANCE MINISTER JUN AZUMI ON GLOBAL ECONOMY:
"The global economy may falter unless Europe makes certain progress in rescuing Greece by the Paris G20 meeting next month. I hope Europe comes up with some solution to the crisis.
ON THE CURRENT CRISIS AND ONE TRIGGERED BY LEHMAN BROTHERS IN 2008:
"The Lehman crisis was about rescuing a company. Now it's involves a country's sovereign debt so in a sense, the situation is more severe."
"There are views, such as from the United States, that the EFSF's functions should be bigger. ... If as a result of appropriate assessment of European banks' assets, it becomes clear that more funds are needed, Japan hopes to cooperate as much as possible if necessary."
BANK OF CANADA GOVERNOR CARNEY ON EURO WILL
"This is a fragile situation in Europe but it's fixable. ... It's not a question of ability for the euro zone. It is question of political will and ... taking these decisions in a timely manner that is ahead of the markets."
CANADIAN FINANCE MINISTER FLAHERTY ON EFSF FLEXIBILITY
"They (the Europeans) agreed in the communique last night to be flexible with respect to the facility, so that's progress."
JAPANESE DEPUTY VICE FINANCE MINISTER MASATSUGU ASAKAWA
ON THE YEN:
"I can't make any comment on the appropriate level for the yen. Logically speaking, as long as deflation goes on, there will be continuous pressure for the yen to rise."
ON WHETHER JAPAN CAN ADOPT MEASURES SIMILAR TO THOSE TAKEN BY SWITZERLAND TO CAP THE FRANC'S RISE: "Switzerland decided to abandon its independence on monetary policy. In Japan, that is simply not an option to take."
AUSTRALIAN TREASURER WAYNE SWAN:
ON POSSIBLE GLOBAL DOUBLE-DIP RECESSION
"The IMF has outlined its view on global growth, and it says that risk is on the downside. But they are still talking about global growth on the order of 4 percent. I think it is far too early to be making those sorts of dire predictions (of a double dip)."
ON ATMOSPHERE AT TALKS IN WASHINGTON
"There's a pretty somber mood in the meetings here."
ON WHETHER CHINA WOULD ALLOW YUAN APPRECIATION
"China has been a participant in all these discussions, and I believe they come to the table in good faith."
EUROPEAN CENTRAL BANK PRESIDENT JEAN-CLAUDE TRICHET
ON RISE OF RISKS:
"Risks to the stability of the EU financial system have increased considerably."
ON EUROPE AT THE CENTER OF A BROADER CRISIS:
"We have in front of us a global crisis of sovereign risk and we are the epicenter of this global crisis."
ON SPREAD OF STRESS:
"Over the past few months, sovereign stress had moved from smaller economies to some of the larger EU countries. Signs of stress are evident in many European government bond markets, while the high volatility in equity market indicates that tensions have spread across capital markets around the world."
ON RISKS OF CONTAGION:
"The high interconnectedness in the EU financial system has led to a rapidly rising risk of significant contagion. This is threatening financial stability in the EU as a whole and adversely impacts the real economy in Europe and beyond."
ON NEED FOR SWIFT RESPONSE:
"Looking ahead, decisive and swift action is required from all authorities."
ON NEED FOR COORDINATED EFFORTS;
"Authorities must act in total unison with a total commitment to safeguard financial stability. Supervisors should coordinate efforts to strengthen bank capital, including having recourse to backstop facilities, taking benefit from the possibility of the European Financial Stability Facility to lend to governments in order to recapitalize banks, including in non-program countries."
FORMER TREASURY SECRETARY AND WHITE HOUSE ADVISER LAWRENCE SUMMERS
ON SERIOUSNESS OF SITUATION:
"It's good that there are Bretton Woods institutions at a moment like this. This is the 20th annual meeting I have been privileged to attend. There has not been a prior meeting at which matters have had more gravity and at which I have been more concerned about the future of the global economy."
ON ECONOMIC RECOVERY:
"There has if anything been too much collective belt tightening. Our challenge is ensuring that growth proceeds at a satisfactory rate in the years ahead."
"The notion of expansionary fiscal contraction is oxymoronic and a bit moronic as well."
ON EUROPE'S PROBLEMS:
"The resolution of the situation in Europe in a way that will protect the global economy goes centrally to two questions. It goes to the credit of the large European sovereigns which has come into increasing doubt in the market system. And it goes to the credit of the major European financial institutions, whose ability to provide credit in the future has been impaired by what has happened.
"Without a resolution of that situation, matters in Europe will not be fundamentally changed.
"If a generous sovereign from Mars came down and paid off every penny of Greece's debt tomorrow, the fundamentals of the European crisis would not be altered. And I for one will not believe we have moved past the grudging incrementalist approach to policy that has been so costly so far until the terms of the policy discussion are not principally involving the next payment to Greece, as has been the case in recent weeks."
CITIGROUP CEO VIKRAM PANDIT:
ON IMPACT ON U.S. BANKS OF A EURO ZONE SOVEREIGN DEBT DEFAULT
"The direct financial exposure to the European banking system is extremely manageable. What's the indirect impact? You're going to have one massive demand shock... The fact is we should all expect some sort of a GDP impact if you have a demand shock that's going to be that significant and that's going to have an impact on business."
SOUTH KOREAN FINANCE MINISTER BAHK JAE-WAN:
"Rather than short-term fiscal consolidation plans, we need credible mid- and long-term ones that can balance short-term risks to growth and fiscal sustainability."
"Emerging economies, for their part, need to step up efforts to mitigate excessive capital flows with strengthened monitoring on capital movements, and the introduction of various macro-prudential measures."
"Financial safety nets should also be established in parallel at the global level to absorb potential external shocks sufficiently."
"The (IMF) fund should further strengthen its capacity to better cope with a crisis in large advanced economies, and to address a systemic risk that could lead to widespread crises. For these reasons, we must expedite the approval process on the fund's quota increase that was agreed last year, and discussion must begin now on the expansion of the Fund's available resources."
IMF WESTERN HEMISPHERE DEP'T DIRECTOR NICOLAS EYZAGUIRRE
ON U.S. FEDERAL RESERVE'S SO-CALLED 'OPERATION TWIST'
"That kind of a measure is something that would have an effect of appreciating the Latin American currencies. And what has happened is that Latin American currencies have been depreciating not appreciating.
"So the depreciation of Latin American currencies -- of Mexico and Brazil (which) has also sold dollars -- is related to the turmoil that is going on in financial markets given the crisis of Europe. It's not related to what the Federal Reserve did."
BRITISH FINANCE MINISTER GEORGE OSBORNE:
ON THE NEED FOR TIMELY ACTION:
"There is now a deadline set which is the Cannes summit. They have six weeks to resolve this crisis.
"There is pressure now on the euro zone from across the international community and that was felt last night at the dinner.
"There was also a sense that the leading lights of the euro zone were aware of the fact that the time was running out for them."
ON CONVINCING FIREPOWER:
"That is not necessarily a question of putting just additional sums of money in but also about how these sums of money that are there can be deployed."
"What is required now is a sense for the markets that there is enough government or central bank firepower to deal with that situation and I think the euro zone is very well aware of that."
IMF MANAGING DIRECTOR CHRISTINE LAGARDE:
ON EXPECTATIONS FOR IMF MEETINGS:
"On the occasion of this meetings, we don't necessarily resolve everything, we can't possibly decide everything, but we actually come together sufficiently to establish a common diagnosis...to agree on a set of priority policies that you will feel comfortable with, taking back hope to your leaders and heads of government to actually pave a path to decision-making and a path to recovery."
"Our problems can be largely economic, but the solutions are essentially political solutions. We need commitment. We need courage."
ON U.S. AND EUROPEAN RESPONSIBILITIES:
"Very quickly the United States must reduce its fiscal deficit particularly for the medium and the long term. It must deal urgently with unemployment and it must relieve pressure on overly indebted households.
"Turning to Europe and more particularly the euro zone, it must deal urgently with the twin problems of sovereign and bank debt -- starting with the first -- and deal with them as a matter of urgency. The countries at the heart of the crisis must implement the programs that they have with the population but also with their partners and with the IMF because we are in this."
"They have made commitments. They have to deliver on those commitments. And equally their European partners must do whatever it takes to support them as they have committed to do."
WORLD BANK/IMF GROUP CHAIRMAN, BAHAMAS PRIME MINISTER HUBERT INGRAHAM ON THE EUROPEAN CRISIS
"The Fund, in close collaboration with EU institutions, has been actively involved in providing financing to those countries most affected by the sovereign debt crisis, and will continue to be involved in finding solutions."
"Amid resurgent global economic uncertainties, we have become even more aware of the danger of commodity price volatility ... The Bank will spend over $6 billion dollars in the agricultural sector, an increase of over $2 billion from a few years ago, while the IFC launched a new agricultural price-risk management tool that will provide up to $4 billion to protect farmers and consumers in developing countries."
BRAZIL'S FINANCE MINISTER GUIDO MANTEGA:
ON THE EUROPEAN CRISIS:
"We have seen a worsening of the global economic crisis in the past few months. Actually, developed countries have never overcome this crisis."
"We run the risk that this crisis will become more serious. There is a risk that the sovereign debt crisis of European countries turns into a global financial crisis."
"We believe that Europe has conditions to face the crisis, if they approve their (bailout) fund with new characteristics. The problem is the timing for its approval. Europe is running against time."
"I hope Europe does not wait for the first countries to break before putting new instruments in place because then the bill will be higher.
"Let's not fool ourselves, that is a crisis that will spread throughout the world."
ON BRAZIL'S FISCAL AND FOREX SITUATION
"At a moment when several countries are suffering from fiscal weakness, Brazil has a very solid fiscal position. By cutting current spending, we have more room to increase investments and to lower interest rates, which remain very high in Brazil."
"The reason behind the weakening of the real is a sharp adjustment in the derivatives market, not dollar outflows."
CANADIAN FINANCE MINISTER JIM FLAHERTY:
ON WHETHER EUROPE'S RESPONSE WAS ADEQUATE NOW:
"We're not quite there yet. Some progress last night. You probably saw from the communique there's some language with respect to flexibility. We've been pressing the need to have adequate capacity in the European facility in order to deal with bank recapitalization in Europe...Our view is it needs to be larger to have the clear capacity to overwhelm the problem."
ON WHETHER A GREEK DEFAULT WAS NOW INEVITABLE:
"Greece is in a very difficult position in terms of paying its debt. I think that's plain to everyone. The key I think is the knock-on effect on banks and making sure that that contagion is controlled, and it's very important that the facility that's being put into place has the capacity to deal with the issue...What I see is a grave challenge for Greece to meet its obligations."
"Certainly in Europe we need an exercise of political will. We need decisiveness. We need clarity, and I made all those points last evening."
"On the fiscal consolidation issue...we intend in Canada to stay on our track (of deficit reduction)."
GERMAN FINANCE MINISTER WOLFGANG SCHAEUBLE:
"There is a broad consensus among the G20 that high deficits are one main reason for the crisis."
"Therefore there was a also a broad consensus that we have to continue on our way to reduce deficits"
"We (the Europeans) have already said that the legislative steps to implement the decisions from the euro summit (for strengthening the EFSF) will be finished mid-October, the latest. I think this is good news."
"At the moment, the troika is working on a technical level on a new report, which will be precondition for the next payment out of the help package for Greece."
"I do not know if in the light of the troika report something has to be changed on the plans being made for Greece (the second help package)."
"It does not make sense to speculate right know about additional steps."
"The Europeans know their responsibility and will act according to this."
EUROPEAN CENTRAL BANK GOVERNING COUNCIL MEMBER EWALD NOWOTNY
ON POSSIBLE REINTRODUCTION OF ONE-YEAR LIQUIDITY TENDERS:
"During the time of the financial crisis, one of the instruments we had was, in the context of full allotment of policy, to have one-year tenders. I think it might be advisable to think about reintroducing this approach."
Asked if the ECB should consider longer-term maturities of up to two years, he said: "I think we do have a kind of established toolkit and I do not see a need to expand about this, but as this is something we have had already, I think we could discuss a reintroduction."
Asked how quickly the tenders could be relaunched, he said, "This is something that we have to discuss in the ECB."
ECB POLICYMAKER AND BUNDESBANK PRESIDENT JENS WEIDMANN
ON MARKET LIQUIDITY:
"I don't want to speculate what we could do. In the past we have said that we are prepared to provide the market with longer-term liquidity when it is necessary."
"We still have full allotment (unlimited liquidity) and with the non-standard measures the central bank and the euro system has shown that has the ability to act."
ON THE GERMAN ECONOMY:
"A new recession (in Germany) is not my expectation,"