Obama team too busy at home to spur G7?
Rocked by the biggest financial crisis in decades, the world is desperately awaiting strong economic leadership—but the new United States administration is very busy right now.
Finance ministers and central bankers of the Group of Seven industrialised economic powers meet in Rome this week to kick off a run of high-profile meetings among international leaders wrestling to get recession-hit economies back on their feet. Ministers from the wider G20 group will then meet in March and US President Barack Obama is set to go to London in April to meet his counterparts from Europe, India, China and other big developing nations for a crisis summit.
Host British Prime Minister Gordon Brown has billed the London meeting as little less than a new Bretton Woods, after the 1944 conference that shaped the modern financial system and created the International Monetary Fund and World Bank.
But officials preparing for the meetings ahead say there has so far been little agreement about what can be done concretely and the new Obama administration above all has big rescue priorities of its own to tend to first and foremost.
The US economy is in recession and millions of people have been laid off. The banking system remains shell-shocked and in need of capital injections and consumers—who fuel two-thirds of US economic activity—are in close to full-scale retreat.
With this backdrop, the Obama team, less than a month in office, has had to hit the ground running very fast with little time to devote to an agenda for dealing with foreign allies.
Many top posts at the US Treasury, including under secretary for international affairs—typically the point-person for dealing with the rest of the world—remain unfilled, as does the deputy Treasury secretary’s job.
The IMF’s chief spokesperson, Caroline Atkinson, is considered a top contender for the under secretary’s job while Annette Nazareth, a former member of the Securities and Exchange Commission, is rumoured to be in line for the deputy’s post.
Meet and greet
Little concrete is expected to be decided at this weekend’s meeting in Rome and officials said getting to know the new US Treasury Secretary, Timothy Geithner—the former head of the New York Federal Reserve—could be the highlight.
That in itself is significant though, as Obama urges Congress to rapidly implement a big new stimulus plan and push to clean up toxic assets festering on bank books.
“It does seem like all hopes are focused on Geithner and Obama, and on the new administration’s fresh thinking and bolder measures to put the US financial sector and economy back on their feet,” said Marco Annunziata, London-based chief economist at UniCredit bank.
“But Geithner’s new Financial Plan today did not impress, and that implicitly puts more pressure on the G7,” he said after the Treasury chief on Tuesday unveiled the US plan to tackle toxic assets.
Geithner is different from many top US officials in one respect—he speaks Mandarin and Japanese and has lived and worked abroad—but got off to an awkward start after endorsing remarks made by Obama on the campaign trail that China manipulates its yuan currency’s value.
Beijing was not amused and the 47-year-old Geithner later tried to smooth over any rift in a telephone call to Chinese Vice Premier Wang Qishan but has yet to put his stamp on relations with other G7 allies.
Eurozone sources have said the eurozone wants the new US administration to be more receptive to their concerns about rapidly changing currency values than Geithner’s predecessor, the Wall Street-trained Henry Paulson.
Boost for Brown
With the US administration seemingly still finding its feet, the next few months of meetings may provide a valuable platform for Britain’s Brown.
Kudos for handling the financial crisis had given Brown a new lease of life in October after months of speculation that he could be pushed out of his job.
His own economy is in recession and still lagging in the polls with an election due in less than 18 months, Brown must be hoping the London summit will burnish his credentials as an international statesman versus his domestic rivals.
Finance minister for a decade before taking office in 2007, Brown has been giving stern lectures about the need to overhaul the financial system, provide huge monetary and fiscal boosts, and guard against protectionism.
Yet he has one of the world’s largest financial centres to protect to some extent and did little to regulate it more strictly when urged to do so by continental European partners during his long spell in charge of running the economy.
And not all are at ease despite the increased enthusiasm for making capitalism safer.
Countries in the European Union are finding it hard to reach common ground, let alone the emerging economies of India and China, happy to be at long last recognised for their weight in gross domestic product and population but still novices when it comes to finding ways of seeking better international coordination.
They may well believe they have few lessons to learn.
French President Nicolas Sarkozy angered London last week when he disparaged British economic policy, saying it had abandoned industry, that its banks were “in a pretty much ruined state” and that Brown’s efforts to stimulate consumer spending had failed.—Reuters