GLOBAL policymakers held an emergency conference call yesterday to discuss the twin debt crises in Europe and the United States that are causing market turmoil and stoking fears of the rich world sliding back into recession.

After a week that saw US$2.5 trillion wiped off global stock markets, political leaders are under mounting pressure to reassure investors that Western governments have both the will and ability to reduce their huge and growing public debt loads. In Washington, a White House economic advisor castigated ratings agency Standard and Poor’s for downgrading the United States’ credit rating to AA-plus from AAA on Friday, a move that over time could ripple through markets by pushing up borrowing costs and making it more difficult to secure a lasting recovery.

Washington’s Asian allies rallied round the battered superpower, with Japan and South Korea both saying their trust in US Treasuries remained unshaken.

South Korea said finance deputies from the Group of 20 major economies discussed the European debt crisis and US sovereign rating downgrade yesterday morning in Asian time zones.

“I expressed our country’s position on the [G20 conference] call that there will be no sudden change in our reserve management policy,” South Korean Deputy Finance Minister Choi Jong-ku said, referring to Seoul’s heavy ownership of US bonds out of more than $300 billion in foreign reserves.

“There’s no alternative that provides such stability and liquidity,” added Choi, who declined to elaborate further on the G20 discussion.

The Group of Seven leading economies agreed to hold an emergency phone meeting of finance ministers and central bank governors on Monday, Kyodo news agency reported yesterday.

A Japanese government source said it “would be normal” for the meeting to take place before Asian markets opened.

The European Central Bank was scheduled to hold a rare Sunday afternoon conference call. Investors are anxiously looking for the central bank to start buying Italian and Spanish debt on Monday to stabilise prices, a move that has split the ECB governing council.

French President Nicolas Sarkozy, who chairs the G7/G20 group of leading economies, conferred with Britain’s Prime Minister David Cameron on Saturday.

“They discussed the euro area and the US debt downgrade. Both agreed the importance of working together, monitoring the situation closely and keeping in contact over the coming days,” a spokesman for Cameron said.

National Bank of Cambodia Director General and spokeswoman Ngoun Sokha has said she expected the international national community to rally behind the US, given the dollar’s use as a reserve currency.

“The international community has an interest in preventing the US dollar from falling abruptly,” she told The Post.

Reached by telephone yesterday, she reiterated previous statements that a depreciated dollar would have both positive and negative affects on the Kingdom’s dollarised economy. Exports and tourism would see growth, while consumers would lose spending power.

She also said she doubted Standard and Poor’s downgrade of the US would affect Cambodia’s debt rating, which Standard and Poor’s had set at B+.

Standard and Poor’s defines B-grade debt as speculative, saying a country with such a rating is “more vulnerable to adverse business, financial and economic conditions but currently has the capacity to meet financial commitments”.

ANZ Royal Bank Chief Exectuvie Officer Stephen Higgins said yesterday the effects of the US debt downgrade would ripple out to Cambodia, though the Kingdom’s economy was “booming” at the moment.

“I think inflation should be the principle concern for those managing the economy here,” he said.

Most industries in Cambodia, especially those linked to Asia, would continue to grow, he said. Rising wage inflation in China has led to increased manufacturing in Cambodia, as plant owners look elsewhere for cheap labour. Higgins doubted that trend would change despite troubles in the US.

Cambodia is now much stronger than it was when the global financial crisis struck in 2008, he said. The economy is less dependent on the garment sector and there is no one industry overheating as property did at the time. REUTERS/ADDITIONAL REPORTING TOM BRENNAN