Australia issues global economic warnings

“The fiscal problems in Europe could intensify, prompting a retreat from risk-taking by investors and a sharp slowing in the world economy,” the Reserve Bank of Australia said in a quarterly economic report released in Sydney Friday. Japan's central bank said it will pump 2 trillion yen (US$22 billion) of funds into the financial system through repurchase operations.

Policy makers across Asia stressed that their economies are likely to be unscathed for now from the collapse in confidence of some European countries to repay debt. Even so, the slide in equities from Wall Street to Sao Paolo to Tokyo and Sydney heightened the attention of officials across the region as Group of Seven finance chiefs scheduled a conference call on the issue.

“We're keeping thorough eyes on its impact on the domestic market and movement of foreign investors,” Choi Yoonkon, the head of the securities market team at South Korea's Financial Supervisory Service, said in a telephone interview in Seoul Friday, referring to the slump in overseas shares.

Japan's Nikkei 225 Stock Average lost 3.1 percent as of 3:29 p.m. in Tokyo, Hong Kong's Hang Seng dropped 1.1 percent and the S&P/ASX 200 Index retreated 2 percent in Sydney. Asian traders came in Friday after the U.S. Dow Jones Industrial Average at one point overnight tumbled the most since the 1987 crash, before closing down 3.2 percent.

Officials differed on their assessment of how the European Union is handling the crisis with Greece, which has faced soaring debt financing costs on concern it will fail to rein in its budget deficit.

“There's been a problem with the Greeks, and specifically Greek sovereign debt and Europe's ability to step in on Greece's behalf, and markets have judged those arrangements to be inadequate,” Australian Prime Minister Kevin Rudd said in an interview with 3AW radio Friday from Melbourne. That has “spread a broader lack of confidence into market perceptions of a range of other economies in Europe.”

By contrast, Japan's National Strategy Minister Yoshito Sengoku said Europe is handling the Greek situation appropriately. He also told reporters in Tokyo Friday that his government is in touch with the European Union and International Monetary Fund with regard to Greece and is watching Tokyo's financial markets closely.

Sengoku added that the Greek crisis won't have a major impact on Asia's economy. Philippine Treasurer Roberto Tan said in Manila Friday that “Asia will be able to lift its own market,” citing the region's strong economic growth. The RBA said Australia could be affected should the global expansion weaken and undermine commodity prices.

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