Ministers 'too slow' on imbalances

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Finance ministers of the world's leading nations have been too slow to react to the threat posed to the global economy from the vast imbalances in capital accounts between the East and West, one of Wall Street's leading bankers said yesterday

William Rhodes, chairman and chief executive of Citibank, warned that the US economy was at risk of "stagflation" if a slump in house prices coincided with a jump in energy prices. He said that if the threats to the world's largest economy materialised, they could trigger a correction to the imbalance between record deficits in the US and surpluses in China and other Asian states.

He told a meeting of the Interional Institute of Finance: "I think a lot of the issues that we are talking about were optimistically talked about at the IMF and World Bank meetings in April: that this would be, if not resolved, progress would be made. The fact is that no progress has been made at all since the last meetings. Not much is expected here."