European Union leaders agreed more steps on Friday to avert a repeat of the banking crisis that has sapped the world economy and the IMF said 2010 might deliver stronger growth than earlier forecast.
The EU leaders backed the creation of a European system of financial supervisors, but gave them only limited powers.
The agreement, outlined in a draft summit declaration obtained by Reuters, followed U.S. President Barack Obama's announcement on Wednesday of what he said was the biggest reform of U.S. financial supervision since the 1930s.
"The European Union, like the rest of the world, still faces the effects of the deepest and most widespread recession of the post-war era. It is imperative for the EU to continue to develop and implement the measures required to respond to the crisis," the leaders said in the draft declaration.
The crisis that struck nearly two years ago when a long-running global credit boom went bust is destroying jobs in economies around the world and the International Monetary Fund steered clear of suggesting signs of slowing economic decline amounted to a recovery.
After "an unprecedented global economic contraction … signs are emerging that the rate of output decline has moderated," IMF First Deputy Managing Director John Lipsky said.
"I expect that in the coming weeks we will revise our growth projections modestly upward, mainly with regard to 2010," Lipsky told a Turkish business conference.
A source from the Group of Eight leading economies told Reuters on June 11 that the IMF had raised its global growth estimates for 2010 to 2.4 percent from 1.9 percent in April because of official stimulus measures.
STEEL OUTPUT CREEPS UP
There were more signs on Thursday and Friday that the trillions of dollars governments around the world have poured into economic stimulus have provided a safety net of sorts.
U.S. jobs and manufacturing data on Thursday gave more evidence the pace of economic decline was easing and that helped to reassure world stock markets, which had second thoughts earlier this week about their strong rally since March.
The MSCI world stocks index edged higher on Friday, following Asian equities, although the indexes were down on the week. Commodity prices and higher-risk investments such as emerging market stocks also firmed.
Global steel production edged up in May from April after going into a nosedive late last year when demand for new buildings and manufactured goods collapsed, while Thai data showed exports fell by a record 26.6 percent in May but the fall in shipments to China — widely viewed a driver of any world economic recovery — was the smallest since January.
In Britain, where the bursting of a house price bubble has deepened the economic pain, housebuilder Taylor Wimpey said the market has stabilised in the past six weeks and it might increase the number of new sites in the second half.
UNCERTAINTY ON RECOVERY
The IMF is scheduled to present updates on July 7 to its April forecast for the world economy to contract 1.3 percent this year in the deepest post-World War Two recession.
"There is still great uncertainty regarding the timing and pace of economic recovery," Lipsky said on Friday.
The crisis erupted after years of easy credit encouraged banks and investors to take increasing risks in their lending and policymakers are intent on tightening supervision.
The EU's financial supervisory proposals involve creating three pan-European regulatory bodies next year to ensure countries introduce new rules on supervision, and a new European Systemic Risk Board that would monitor risks to stability.
The head of Britain's financial regulator said on Friday he was broadly in favour of the EU proposals and also said banks viewed as too big to fail may need to meet tougher standards on their capital defences than their smaller rivals.
The comments by Adair Turner, chairman of the Financial Services Authority, echo concerns about big banks raised earlier this week by Bank of England Governor Mervyn King and by the Swiss National Bank, which called on Thursday for rules allowing drastic action on the nation's dominant banks if their problems threatened the entire economy.
