World economic leaders have called on commercial banks to step up lending to revive the global economy, which has been plunged into recession by failure of the world financial system.
The World Bank, in a letter to Group of Eight (G8) nations due to meet this week, said interventions by central banks and governments appeared to have 'broken the fall in the global economy', but 2009 remained a dangerous year.
'Recent gains could be reversed easily, and the pace of recovery in 2010 is far from certain,' bank president Robert Zoellick wrote to G8 host, Italian Prime Minister Silvio Berlusconi.
The G8 leaders, meeting in Italy, are expected to touch on longer-term reforms of world finance. China has raised the idea of creating alternatives to the dollar as a global reserve currency. But Chinese officials said the idea, which hit the dollar last week, was only a distant prospect.
The parlous state of commercial lending, despite the government injections of billions of dollars into banks, remains a central concern for economic and political leaders.
Data released today showed overnight deposits with the European Central Bank had reached an all-time high - evidence that banks prefer to hoard cash rather than risk lending it.
China has floated the idea of an alternative to the dollar as global reserve currency as part of reforms of a financial system found wanting in the worst crisis in decades. France and Russia have urged discussion of the matter at this week's G8 summit, expanded to include China and other developing nations.
But G8 sources suggested there was no appetite for any change to the status quo, and China itself played down the likelihood of a reform in the current regime.
'The US dollar is still the most important and major reserve currency of the day, and we believe that that situation will continue for many years to come,' Chinese Vice Foreign Minister He Yafei told reporters in Rome. His views were echoed by central bank economist Wang Xin, who said it would be impossible 'to get there in one step'.
Russia has been promoting the notion of multiple reserve currencies in recent months. US President Barack Obama, who is in Moscow from today, is widely expected to discuss the matter at talks with Prime Minister Vladimir Putin.
The debate is highly sensitive in financial markets wary of risks to US asset values. Last week the dollar dipped briefly after suggestions its role may form a part of the agenda of the July 8-10 G8 summit.
