G20: Your Leaders will save you

Raise your hand if you think these meetings (and their associated communiques) remind you of pre-war jockeying during the great depression.

The problem with global coordination is that politics (in republics, anyway) is inherently local and domestic.

It is also clear that some members of the G20 think it better to wait out the storm, pick up the pieces, and start afresh.

G20 communiqué steers clear of protectionism
By Guy Dinmore and Marco Pasqua in Rome
Published: March 29 2009 15:01 | Last updated: March 29 2009 20:34
Leaders of the world’s 20 leading and emerging economies meeting in London this week are set to reiterate a pledge to avoid protectionism and complete stalled global trade talks but offer little to those calling for more economic stimulus.

A 24-point draft of the G20 meeting’s final communiqué, obtained by the Financial Times, does not contain specific plans for a fiscal stimulus package, which had been resisted by European countries. It claims that the fiscal expansion already in process will increase global output by more than 2 percentage points and create more than 20m jobs.

Combined with increased resources for a reformed International Monetary Fund, the fiscal and banking support actions aim to enable the world economy to expand by the end of 2010. The draft left a blank space where a target for economic expansion could be inserted.

An official source said the text was unlikely to change substantially ahead of the April 2 summit, although there is still debate over certain figures.

Stating that a “global crisis requires a global solution”, the G20 leaders pledge: “We are determined to restore growth now, resist protectionism, and reform our markets and institutions for the future . . . We are determined to ensure that this crisis is not repeated.”

A second official source confirmed it was the latest G20 draft, but cautioned that it was still open to changes during more than two days of negotiations in London from today.

Describing it as a “UK Treasury trial balloon” he said some points were open to negotiation, including co-operation, stimulus packages and, above all, what he called problematic reforms of the IMF. China and Brazil might introduce changes, the source added.

Avoiding direct mention of capitalism, the leaders state their fundamental belief in “an open world economy based on market principles, effective regulation, and strong global institutions” to ensure “a sustainable globalisation with rising prosperity for all”.

Responding to inflationary warnings made by Germany and other countries, the G20 also say they are committed “to put in place exit strategies from the necessary expansionary policies, working together to avoid unintended impacts on others”.

The communiqué touches on other well-trodden themes from the previous G20 meeting, but breaks little new ground.

Concern for the stability of emerging economies is a central theme in the document. The summit agrees to increase resources available to the IMF, borrowing through the market if necessary. This would probably involve the use of the IMF’s own currency special drawing rights, a move for which China has pushed. A substantial increase in lending by multilateral development banks is agreed, including funding from export credit and investment agencies.

On currencies, G20 nations pledge to refrain from “competitive devaluation”.

Hedge funds will come under oversight of a stronger Financial Stability Forum, which has expanded to include all G20 members and been renamed the Financial Stability Board.

Non-co-operative tax havens will be put under unspecified sanctions and named in a document to be published at the summit.

Executive pay and bonuses should “reward actual performance, support sustainable growth and avoid excessive risk-taking”, according to principles already laid out by the FSF.

Responding to accusations of rising protectionism in national stimulus packages, the leaders reaffirm the commitment made in Washington last year not t raise new barriers to investment or trade, and not to create subsidies for exports. “We will not retreat into financial protectionism,” they say.