The G20 ministers ended their meetings yesterday proclaiming consensus and pledging to cooperate in solving the financial crisis. This, despite their being very little consensus among the G20 leaders on what policies to take and no agreement being reached that will have meaningful policy impact.
Chris Giles for FT:
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.
Such agreements as were reached were at the level of theory, Sumeet Desai reports for Reuters:
Without providing many specific numbers, finance ministers and central bankers from the Group of 20 nations said all policies — fiscal and monetary, conventional and unconventional — will be used to tackle the deepest global downturn in generations.
“Our key priority now is to restore lending by tackling, where needed, problems in the financial system head on, through continued liquidity support, bank recapitalization and dealing with impaired assets,” the G20 statement said. “We … are prepared to take whatever action is necessary until growth is restored. We commit to fight all forms of protectionism and maintain open trade and investment,” the statement said.
But, as BBC notes, even the high level consensus is weak.
While the US and UK finance ministers have led the call for further public spending on stimulus packages to help lift economies, some of their European counterparts have urged caution.
“We had an agreement from everybody around the table to do all that that is necessary for as long as is necessary and that sends an important signal to markets,” [UK Secretary of State for International Development Douglas Alexander] told the BBC. “There was a recognition with 20 countries around the room that the fiscal response is going to vary from country to country.”
President Barack Obama also denied suggestions of division between the US and some European countries. He said he was fully committed to pursuing regulation of the global financial system. “I don’t know where this notion has emerged that somehow there are sides developing with respect to the G20,” he said. “There are no sides.”
WaPo‘s Mary Jordan joins the horde of journalists who somehow nonetheless saw sides.
The meeting came after days of disagreement between U.S. and European officials about the best approach to tackling the economic problems. The United States has urged countries to enact bigger spending programs to fuel growth, while some European countries have focused on passing new regulations for financial markets.
Meanwhile, the BRICs apparently did not get the happy talk memo. AP‘s Jane Wardell:
Brazil, Russia, India and China — the major emerging countries at a meeting of international finance officials here — have called on the United States and Europe to improve information sharing and demanded a bigger role in guiding the International Monetary Fund.
In a joint statement likely to be interpreted as a criticism of the main developed countries, the four said that the U.S. and the euro zone countries “should step up information sharing and policy coordination and work to ensure that macroeconomic policy is more balanced, proactive, coordinated and countercyclical with a view to promoting global economic recovery.”
Developing countries have complained they are being sidelined in talks between finance ministers and central bankers from the Group of 20 nations, which have so far been dominated by divisions between Europe and the United States over how to tackle the economic downturn.
While the crisis is months old and one might think the leaders of the world’s most powerful economies would have come closer to figuring out how to respond by now, that fact of the matter is that there’s no consensus within most of these countries, let alone among them. The issues are incredibly complex and for the most part unprecedented. We’re traveling in uncharted waters here. Add to that different political cultures, the disparate impact of the crisis, and all the other issues that typically make international agreement next to impossible even when the stakes are much lower, no one should be surprised.