British Business Secretary Peter Mandelson said Wednesday that governments have no choice but to keep in place for now the massive stimulus that is propping up the global economy, though warned such measures must ultimately be unwound for the sake of fiscal soundness.
"The task of sustaining the recovery and not doing anything to wreck it is the biggest economic policy challenge facing the world," Mandelson told a meeting sponsored by a South Korean business group. "We need to coordinate what we're doing so as to maximize the impact of our national policies."
Because of the danger of a deterioration in the world economy support policies must be retained "so as to minimize the risk of that happening and, if it does, have measures in place to overcome it as quickly as possible," he said.
Mandelson's comments came on a brief visit to South Korea for talks with government and corporate officials, including the country's trade minister and President Lee Myung-bak. Britain is the current chair of the Group of 20 and will pass leadership next year to South Korea, which plans to host a summit in November 2010.
Top economies have taken aggressive measures since the onset of the global financial crisis just over a year ago, implementing massive extra spending, slashing interest rates and even bailing out entire industries.
Leaders from the Group of 20, which has taken the lead in steering the global economy, agreed at their summit last month in the United States to continue with government spending programs and low interest rates to nurture a global recovery.
Yet in Australia, hopes of a recovery are so established that the central bank Tuesday felt able to raise its benchmark interest rate by a quarter percentage point _ the first hike by a major central bank since the financial crisis worsened last fall.
The Reserve Bank of Australia raised its cash rate to 3.25 percent from a 49-year low of 3 percent after having slashed it a total of 4.25 percentage points to help deal with the crisis.
Other nations have also slashed rates to record lows, including South Korea, where it stands at 2 percent. The Bank of Korea meets Friday, though is expected to keep the rate steady.
Mandelson, an influential figure in British politics and Prime Minister Gordon Brown's de facto deputy, acknowledged that while the coordinated efforts are keeping the global economy afloat, they cannot go on forever.
"Our public finances will not support indefinitely the sort of stimulus measures that have been taken necessarily to fight back against the recession," he said. "Over the medium term there has to be action taken to rebalance national finances."
He warned, however, that acting "too early, too quickly and in an ill-judged way, we would be threatening the recovery on which our future growth depends. That's why these decisions have got to be got right rather than hurried."
Mandelson, in his previous post as European Union trade commissioner, launched the EU's free trade talks with South Korea in 2007. Formal negotiations concluded this year, though the deal still requires approval by EU member states and South Korea's parliament.
Speaking later at a separate business gathering, Mandelson said the accord will eventually remove 97 percent of the tariffs on trade between the EU and South Korea to the tune of almost 32 billion euros a year. Trade between the two sides totaled $98.4 billion last year.
"I hope people will look at this free trade agreement as a stimulus package, as a recovery package, as a package that will enable us ... to take our trade to a new and higher level," he said.
