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More hopeful possibilities included a quicker than expected adjustment in bank balance sheets following concerted measures by management, central banks and governments around the world to shore up their finances, and more substantial fiscal stimulus measures from governments in the form of higher spending and lower taxes. However, Elmeskov said any government measures should be "timely and temporary and designed to so as to ensure maximum effectiveness" and that a credible framework is in place to ensure budget responsibility in the long-term. Tax cuts aimed at credit-starved consumers might prove effective, he added. This weekend's meeting of the Group of 20 industrialized and emerging economies in Washington is expected to back coordinated tax cuts or spending boosts around the world. The OECD also put its weight behind efforts to bolster the regulatory framework for the financial world, in particular to increase transparency and prevent a recurrence of the financial aspects of the crisis, which started with the collapse of the market for bonds based on U.S. mortgages to people with shaky credit. "It will also be necessary to re-examine the features of the regulatory and supervisory framework that created incentives for excessive risk-taking and led financial institutions to increase leverage in non-transparent ways to levels that proved to be unsustainable," said Elmeskov. Though the leaders of the G-20 will be discussing reform proposals, final agreements on concrete measures are expected to wait until after President-elect Barack Obama enters the White House in January.
[Associated
Press;
Copyright 2008 The Associated Press. All rights reserved. This
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