G20: Too early to end stimulus
Finance officials from rich and developing countries pledged on Saturday to maintain emergency support for their economies until recovery is assured, but failed to reach a clear agreement to bear the cost of fighting climate change.
There was also a mixed reaction among the Group of 20 leading rich and emerging nations to a British-led push to consider a fund for bank bailouts, possibly financed by a tax on financial
transactions, to ensure that taxpayers don’t bear the brunt of any future rescues.
The grouping—representing about 90% of the world’s wealth, 80% of world trade and two-thirds of the world’s population—said in a statement after talks in St. Andrews, Scotland, that economic recovery is “uneven and remains dependent on
US Treasury Secretary Timothy Geithner said US jobs figures out on Friday showing unemployment at a 26-year high of 10,2% “reinforced that this is still a very tough economic environment”.
While the “process of growth is now beginning”, that fledging growth still needs to be reinforced to create jobs and get businesses investing to underpin the recovery in the housing market and elsewhere, Geithner said.
“If we put the brakes on too quickly, we will weaken the economy and the financial system, unemployment will rise, more businesses will fail, budget deficits will rise, and the ultimate cost of the
crisis will be greater,” he told reporters in Scotland. “It is too early to start to lean against recovery.”
The statement smoothed over divisions among G-20 nations about whether it was time to start talking about exit strategies to unwind recent massive stimulus measures. Germany, France and Russia have called for a joint plan on when countries should start repaying debt, and the European Central Bank has indicated it will soon start withdrawing some of its emergency lending to banks.
On climate change, the G-20 officials also said they wanted “an ambitious outcome” at a major UN conference in Copenhagen next month—but did not commit to a funding package to help poorer
nations adapt to a warming climate.
European nations have promoted a global climate fund of about €100-billion a year by 2020—combining government and private finance—as an incentive for poor developing nations to agree to tight curbs on greenhouse gas emissions.
Swedish Finance Minister Anders Borg, whose country holds the rotating European Union presidency, said no deal on financing would mean that “we will end up with a very difficult situation in
German Finance Minister Wolfgang Schaeuble said an agreement was scuppered by emerging nations’ unwillingness to contribute.
“Basically a group of emerging nations made it clear that they were unwilling to invest their own funds in the fight against climate change,” he told reporters. “We were prepared for that and it was obvious that the industrialised countries would of course bear most of the burden.”
Schaeuble indirectly blamed their opposition to the failure of other rich nations—such as the US—to stump up money.
Geithner made no promises on Saturday, saying only that progress was being made and that discussions in Scotland showed “there is now an understanding of its place in business and economic impetus for us all.”
There was also little traction for British Prime Minister Gordon Brown’s call for urgent consideration of a global fund to rescue troubled banks, possibly financed by a tax on financial
Brown said such a measure was necessary because “it cannot be acceptable that the benefits of success in this sector are reaped by the few but the costs of its failure are borne by all of us”.
Supporters of measures such as a so-called Tobin tax—a flat tax on currency transactions named after the Nobel Prize laureate James Tobin—say the money would protect countries from spillovers of financial crises. Critics argue the tax would simply dry up world financial flows.
Geithner said that the US wanted to focus “on building a system where taxpayers are not exposed to losses if the government has to step out in future to put out the financial fires”, but ducked any clearer comment on Brown’s proposals.
Russian Finance Minister Alexei Kudrin said he was “sceptical about such tactics”.
“Gordon Brown is well known as the person who raises taxes all the time,” he added.
But Sweden’s Borg said there was a “strong argument for a stability fee or stability tax on bank assets”.
Brown said the International Monetary Fund would report back to the G-20 in April on how global levies on speculation might work.
The climate issue has been the focus of small-scale protests around St Andrews. About 200 demonstrators gathered at West Sands beach on Saturday with a group dressed as bankers sticking their heads in the sand.
The officials also emphasised the need for quick implementation of banking industry reform, saying that stronger standards should be developed by the end of 2010, that could be put in force by the
end of 2012 as financial conditions improve.
The G-20 is comprised of Argentina, Australia, Brazil, Britain, Canada, China, France, Germany, India, Indonesia, Italy, Japan, Mexico, Russia, Saudi Arabia, South Africa, South Korea, Turkey,
the United States and the rotating EU presidency. - Sapa-AP