G20 pledges to restore global growth
By Chris Giles in Horsham, The Financial Times, March 14 2009 18:26
The world’s leading finance ministers and central bank governors pledged on Saturday “to take whatever action is necessary until growth is restored,” suggesting that further action on monetary policy, fiscal stimulus and regulatory reform would be introduced in the months to come.
Although the meeting ended without specific new commitments and no country or central bank would be forced to change any existing policy in light of the communiqué, the participants representing 85 per cent of the world’s economic output said they were pleased by the spirit of cooperation among the Group of 20 leading and emerging economies.
The financial leaders put a brave face on recent divisions and splits over fiscal policy with British officials insisting that more progress had been made than had been expected earlier in the week when transatlantic disagreements were raging.
As the meeting ended, ministers attempted to strike a cooperative tone. Alistair Darling, the UK chancellor said “there was a great deal of consensus on the urgency and the steps that need to be taken”.
Tim Geithner, the US treasury secretary said he was “seeing the world move together at a speed and on a scale without precedent in modern times”.
The spirit of cooperation tone contrasted with the past week’s transatlantic tensions over the US call for other countries to match its 2 per cent of national income discretionary fiscal stimulus. This demand was dropped by Mr Geithner, who replaced it with emollient language. “All the major economies are putting in place substantial fiscal packages. The stronger the response, the quicker recovery will come,” he said.
The communiqué contained a commitment “to deliver the scale of sustained [fiscal stimulus] effort necessary to restore growth”, and it called on the International Monetary Fund “to assess the actions taken and the actions requires”.
But in press conferences that followed the release of the communiqué it became clear that this commitment was weak. Mr Darling conceded that the IMF already plays that role on the global stage and he was unable to say whether the G20 communiqué would alter his thinking in any way over Britain’s planned fiscal tightening in 2010.
The central bankers present said they would “maintain expansionary policies as long as needed, using the full range of monetary policy instruments, including unconventional policy instruments, consistent with price stability”. All leading central banks could sign up to that commitment without changing their current policies.
Although a deal to increase the funds available to the IMF to tackle the global crisis in emerging economies is close to completion, it was not finalised as expected by the finance ministers and has been left to the leaders summit on April 2 for ratification.
But in a sign that a global bargain on reform of international institutions was close to agreement, the G20 agreed to bring forward the next review of voting power at the IMF to 2011 from 2013 and in an end to the traditional carving up of the heads of the World Bank and Fund between Europe and the US, the communiqué said “the heads of the international financial institutions should be appointed through open, merit based selection processes”.
“We cannot carry on as if the world hasn’t changed in the last 60 years,” Mr Darling said.
European governments were pleased with the agreement on a common framework for the regulation of the financial sector including systemically important hedge funds. Mr Darling said that countries had moved substantially closer together on this issue in recent months.
A head of steam has also now built up behind global regulatory moves to ensure banks build up buffers of resources in good times so that they will be able to survive a future crisis better.
Posts
No comments:
Post a Comment