6 Nov 2010

US economic stimulus move criticised

1:55 pm on 6 November 2010

Germany, China, Brazil and South Africa have criticised American plans to pump $US600 billion into the country's economy.

German Finance Minister Wolfgang Schaeuble said the policy was "clueless" and would create "extra problems for the world", the BBC reports.

Mr Schaeuble said the move wouldn't solve America's problems.

Federal Reserve Chairman Ben Bernanke defended the central bank's move, saying the return to a strong US economy was critical for global stability, Reuters reports.

Bank's move will 'hurt developing countries'

South Africa's finance minister Pravin Gordhan warned that developing countries, including South Africa, would bear the brunt of the US decision to "open its flood gates".

China's Central Bank head Zhou Xiaochuan urged global currency reforms.

China's Vice Foreign Minister Cui Tiankai said the Federal Reserve had the right to take steps without consulting other countries beforehand, but added: "They owe us some explanation."

On Thursday, Brazil's finance minister Guido Mantega warned the Fed's move would hurt Brazil and other exporters.

The US Federal Reserve announced on Wednesday that it would spend $US600 billion to buy government bonds, in the hope that the cash injection would kickstart the country's economy.

However, this weakens the dollar, making imports from around the world more expensive for US consumers.

The heads of state and government of the G20 group of the world's leading nations is due to meet in a week in South Korea, with currencies and trade imbalances high on the agenda.