Taking a stance

The debate in Tokyo is focused on the European debt crisis: IMF Managing Director Christina Lagarde branded it the epicenter of the global economic crisis and Jose Vinals, the head of the IMF's monetary and capital markets department, warned Europe might face another credit crunch.

Meanwhile, German Finance Minister Wolfgang Schäuble sat back to enjoy a relaxed breakfast. Talks with colleagues from the G7 most industrialized and emerging countries on Thursday gave him a more positive impression, he said.

"Up to this point, everyone has acknowledged that we've made significant progress in Europe in the fight against and efforts to overcome the sinking confidence in the euro," he said. "The basic disposition is much more positive this time."

The German finance minister presented figures showing eurozone nations made more progress in their fight against budget deficits than the global public may realize. Schäuble pointed out that "we managed to cut by half the entire eurozone's 2009 to 2012 deficit from 6.4 percent to 3.2 percent of GDP. That has carried some weight in the debate."

The eurozone has thus made better progress where national borrowing is concerned than heavily-indebted Japan, Britain and the US - states that so far are on no one's radar as potential sources of danger to the stability of the global economy.

Change in perception

In a remark directed at US Treasury Secretary Timothy Geithner, Schäuble said he is convinced the US approach of resorting to expansive monetary policies by printing money cannot be transferred to Europe as a solution to the debt crisis. He said many colleagues agreed there should not be more liquidity on a global scale. "As a basic principle, that is understood," he said.

According to the German finance minister, there is a great discrepancy between the public perception of the euro crisis and the actual progress made so far by Europeans. Schäuble and Bundesbank President Jens Weidmann plan to use the annual IMF and World Bank und World Bank meeting in Tokyo to correct that impression.

In contrast to meetings in previous years, he said, the gathering in Tokyo is bound to be marked by the "recognition that global confidence is on the increase and that Europe is busy solving its problems well,"Schäuble said. It has always been a mistake to see Europe as the source of the problems in global development, he added.

Printing money is no cure-all

Weidmann in particular is concerned that many governments have chosen the path of least resistance in the fight against the crisis - and put the burden on the central banks. Monetary policies are neither a cure-all nor a silver bullet, he said: rather, they are comparable to pain killers that fight the symptoms but not the cause. Ultimately, it is up to governments to deal by introducing fiscal and structural reforms.

While the global economy is in a difficult situation, the head of Germany's Bundesbank said, there's no reason for pessimism. He added he does not expect economic growth in Europe's largest creditor country to slow down considerably.

"Germany's economy continues to be robust, but it will increasingly be affected by intra-European adjustment processes and the insecurity in the wake of the euro crisis," Weidmann said in Tokyo. "Demand from the eurozone countries is poor."