Nick Tattersall Istanbul
FINANCE ministers and central bankers face a tough task co-ordinating action to spur global growth at Group of 20 (G20) meetings this week, with major economies running at different speeds and monetary policies diverging.
Concern over the ability of the US to sustain the global economy as most of the world slows will be high on the agenda as the G20 leading economies hold talks in Istanbul today and tomorrow.
The meetings come as Greece casts a new shadow over Europe, cheap oil plays havoc with inflation and growth forecasts, and a strengthening dollar threatens emerging economies. “There is a lot at stake,” International Monetary Fund managing director Christine Lagarde said on Friday. “Without action, we could see the global economic supertanker continuing to be stuck in the shallow waters of sub-par growth and meagre job creation.”
Turkey’s Deputy Prime Minister Ali Babacan told an Institute of International Finance (IIF) meeting yesterday that tackling sluggish global growth and giving low-income nations more voice would be among the priorities for Turkey’s G20 presidency.
The former will be easier said than done.
US Treasury Secretary Jack Lew said last week that the US could not be “the sole engine of growth” and a senior US official said Washington’s message going into the meetings would again be that Europe was not doing enough.
“Kick-starting global growth will be front and centre” at the G20 meetings, Canadian Finance Minister Joe Oliver said last week, citing the stalled euro zone, slowdowns in China and India and geopolitical crises in Ukraine, Iraq and Syria as key risks. “Though America is carrying the world economy at the moment, that is simply not sustainable.”
Germany is likely to argue that its rising domestic demand and plans to increase public spending show Europe’s largest economy is doing what it can, according to European sources familiar with the G20 agenda.
Babacan said pushing G20 members to meet previous reform commitments would be key, a strategy he has dubbed: “Keep your word, or explain”.
“It has a lot to do with leadership… Doing the necessary but difficult things,” he said.
Close financing gap
Coming good on pledges made at November’s G20 summit in Brisbane could add more than $2 trillion (R23 trillion) to the global economy and create millions of new jobs over the next four years, Lagarde said.
UBS chairman Axel Weber said enabling the private sector to help close the financing gap for an estimated $60-$70 trillion in infrastructure spending needed by 2030 would fuel growth.
Higher capital requirements were limiting banks’ ability to invest and regulators should “revisit whether they got that calibration right”, the former Bundesbank president told the IIF meeting.
“My key message to policymakers would be very easy – don’t work against the private sector, work with it,” he said.
The G20 put together a global stimulus package during the 2007-09 financial crisis but today’s challenge is more delicate, with diverging monetary policies a cause of global turbulence. The US Federal Reserve looks set to raise interest rates this year, a stark contrast to impromptu cuts from India to Australia, Canada to Denmark, as well as China’s cut in bank reserve requirements and the abrupt end to the Swiss franc cap.
A senior Canadian official said the G20 communique would probably emphasise the importance of central bank actions in sustaining demand and said the Fed and Bank of England had voiced support for other central banks’ actions to lift growth. – Reuters