G20 AGENDA:WORLD LEADERS left the G20 summit yesterday without securing a deal to boost the International Monetary Fund's firepower for shoring up weak economies.
The final communique said the G20 would ensure the IMF had the resources to play its “systemic role” and they “stood ready” to give the fund extra resources, but the summit deferred a decision on how this could be done until early next year.
IMF managing director Christine Lagarde said she was satisfied the fund had enough money at its disposal. “I go away from Cannes with . . . . no cap, no floor, no ceiling on resources,” she said.
While it would have “looked good” to “see big numbers on the board”, she added that “with the resources I have I can perfectly well face requests from my member states”.
Participants said there was agreement that the IMF should play a more pivotal role in supporting vulnerable states.
“The crisis in Europe is causing a global systemic crisis including Asia. Rather than creating a new global framework, everyone is expecting the IMF to become more proactive,” Japanese finance minister Jun Azumi said.
“The focus of debate is how to set up a firewall, but we consider that the IMF should become one big wall.”
French president Nicolas Sarkozy, whose ambitious G20 agenda was sidelined by the euro crisis, proclaimed himself satisfied with some “remarkable” progress on key issues.
On one of his priorities – a tax on financial transactions, with the proceeds going to projects in the developing world – there was no agreement, with the final statement merely noting the idea. The US, Britain and Canada were against the proposal, which was endorsed by philanthropist Bill Gates during an address to the summit on Thursday.
Mr Sarkozy said he was heartened, however, that France had persuaded almost 10 states of the merits of a transactions tax. “I remain convinced [the tax] is possible . . . that it’s indispensable financially given the crisis and that morally it is absolutely necessary.”
He also cited the G20 agreement to name and shame tax havens. “At the time of the London G20 there were dozens of tax havens, and the phrase itself was taboo. Now 11 tax havens were to be monitored and forced into line,” he said.
On foreign exchange policy, the G20 agreed to move “more rapidly” towards market-determined rate systems and to enhance flexibility in foreign exchanges.
The statement mentioned China by name for the first time in the context of greater currency flexibility – a gesture welcomed by US president Barack Obama, whose government believes China keeps the yuan unfairly low to give its goods an export edge over similar US products. “This is something we have been calling for for some time, and it will be a critical step in boosting growth,” he said.
The G20 named 29 banks as being so important to the global financial system that they were likely to need to hold more capital than rivals. For these institutions, 17 of which are from Europe, the summit said plans must be put in place to let them be wound up without taxpayer help were they to hit trouble.
In view of the contrasting fiscal situations across the G20 states, the summit eschewed a common plan to boost growth and employment. However, countries with large surpluses and export-oriented economies agreed to take additional steps to support growth and boost demand in their own countries.
Italy pledged to bring its budget “close to balance” in 2013.
“After two days of very substantive discussions, I can say that we have come together and made important progress to put our economies on a firmer footing,” Mr Obama said.