SME WORLD Bureau
Jan 2012

 The G-20 summit in Cannes has ended in crucial dismay. The world leaders seemed neither settled with concrete plan to boost growth and rebalance the global economy, nor agreed on any rescue package for the eurozone. The final communiqué issued after the summit embodies mere good intentions rather than any tangible action. It shows ambivalence of world's twenty big economies. However, some positive attitude shown by G-20 meet include:

(a) commitment to move more rapidly towards greater exchange rate flexibility, without specifically mentioning China,

(b) agreement to support the IMF and give it more money if necessary,

(c) welcoming Italy's invitation to the IMF to monitor its economic reforms,

(d) calling on countries with strong public finances to take steps to boost domestic demand,

(e) welcoming the eurozone's plans to restore confidence and financial stability, and

(f) setting up a task force on youth employment.

Let's examine what it really mean to diverse economies.

Eurozone

The most disillusioned section is Eurozone. It failed to get the leaders of the world's wealthiest economies to help out with its debt troubles, but everyone felt relieved that at least they forced the Greek prime minister not to hold the world hostage with a bailout vote. German chancellor Angela Merkel said, "There are hardly any countries here which said they were ready to go along with the EFSF (euro zone rescue fund)”. Under pressure Italy agreed to have the International Monetary Fund monitor its progress on a quarterly basis. The IMF said a team would go to Italy by end-November and said the conclusions of its regular and independent monitoring of Italy would be published.

UK was in no mood to help Eurozone. British Prime Minister David Cameron said, "Every day that the euro zone crisis continues is a day that has a chilling effect on the rest of the world economy. Britain will not contribute to the euro zone bailout fund and we are clear that the IMF will not contribute to the euro bailout fund either. The job of the IMF is to help countries in distress, not to support currency unions.”

France threatened debt-ridden PIGS countries of exclusion. French President Nicolas Sarkozy said, "We never wanted to change governments, either in Greece or in Italy. That is not our role, that is not our idea of democracy, but it's clear that there are rules in Europe and if you exonerate yourself from these rules you exclude yourself from Europe”.

IMF

G20 members broadly agreed to raise the IMF's warchest to help stop eurozone infection dropping the world back into recession. No numbers were fixed, but countries such as Britain, China and Australia said they were ready to inject new funds into the IMF, either through bigger quotas or through additional money for the IMF's New Agreements to Borrow (NAB) crisis fund.

Separately, there were discussions about boosting global liquidity by allocating IMF Special Drawing Rights to every member country, which boost their national reserves, as was done in 2009. Besides, euro zone members were discussing possibly pooling their SDRs to build a fighting fund that could support vulnerable peripherals such as Italy and Spain.

USA

Under a package to reinvigorate growth and employment, the United States committed itself to timely near-term (impending) measures to sustain economic recovery.

USA expressed concern over restive (restless) global financial markets about high debt in Eurozone members. It didn't provide concrete measures, but expressed support for the European-led bailout plan for Greece announced Oct. 27 and welcomed Italy's decision on Friday to invite the International Monetary Fund to verify its reform program quarterly. US President Barack Obama said, "The world faces challenges that put our global economic recovery at risk. I am confident Europe has the capacity to meet this challenge. What the world looks for in moments such as this is action."

Developing countries

Although the G-20 summit was dominated by Europe's debt crisis, but developing countries want the grouping of major economies to refocus on a bigger global agenda that includes creating jobs, improving farming and fighting climate change.

Developing countries could not pushed forward their agenda for more attention to long-term changes aimed at making the global economic system more equitable, increasing investment in Africa, making farming more productive and stimulating investment and trade.

A spokesman for South African President Jacob Zuma said, "G-20 should attempt to come up with a plan that incorporates bringing about growth in developing countries." Chinese President Hu Jintao called for a still larger role for emerging countries in "a more equal and balanced global partnership."

India

India seemed to be primarily concerned with resolving the Eurozone crisis and tax havens to adopt prudential norms for sharing of information to check money-laundering and terror-funding. Prime Minister Dr. Manmohan Singh told G20 leaders that Eurozone crisis is a potentially grave threat to the stability of the global economy, but made it clear that management of the crisis is primarily the responsibility of the European countries.

The communique issued at the end of the two-day meeting warned of action against jurisdiction and entities that will not cooperate in ensuring transparency in tax frauds. It called upon the nations to "adhere to the international standards in the tax, prudential and Anti Money Laundering/ Combating the Financing of Terrorism (AML/ CFT) areas". Dr Singh hailed the communiqué, saying it endorses India's call for increased banking transparency and exchange of information to combat tax fraud and evasion and other illicit flows.