G20 finance chiefs mull growth agenda, finance
June 4, 2010 Though the finance ministers and central bank governors gathered
in this southern Korean port city are seeking to build confidence
in prospects for growth, a sense of urgency hangs over the
gathering.
"The recent event in Europe and volatility in the financial
market have clearly shown us the global recovery is still
fragile," said Yoon Jeung-hyun, minister of Strategy and Finance,
at the opening as the chair of the session.
"Today we are meeting at a critical time when our cooperation
is more important than ever to address significant economic risks
and firmly secure the global recovery," Yoon said.
The euro sank to a new four-year low Friday, as concerns
resurfaced about the health of European banks. Fresh U.S. jobs data
also provided scant comfort, with new job creation limited mainly
to a wave of census hiring - suggesting the recovery will not bring
relief soon for the millions of Americans who are unemployed.
As they discuss the agenda for a summit in Toronto later this
month, the leaders face myriad demands over how to reshape the
global financial system and avert a "double dip" back into
recession due to the European sovereign debt crisis.
Speaking en route to Busan, U.S. Treasury Secretary Timothy
Geithner expressed support for the eurozone's efforts to shore up
its fiscally shaky members.
The leaders looked likely to finesse conflicts over other
issues, such as banking regulation, in favor of a strong show of
support for Europe's handling of its sovereign debt crisis.
"Sustaining world economic growth is the most important item on
the G-20 agenda this weekend," said British Chancellor George
Osborne.
French Finance Minister Christine Lagarde said Friday evening's
discussion focused on growth and on reining in budget deficits, and
the need to have credible mechanisms to restore stability.
Osborne said he still would be pushing for agreements on
tightening banking capital requirements to be concluded.
"We want to end the uncertainty," Osborne said in remarks read
by his press secretary.
World Bank experts, gathered for a conference on the sidelines
of the G-20 meeting, called for the group to recalibrate its agenda
to take into account the growing potential of developing countries
to help power long-term growth.
"The G-20 needs the rest of the developing world for reasons of
self-interest," said Ngozi Okonjo-Iweala, a World Bank managing
director.
Growth in developing countries is forecast to average 6 percent
this year - twice the rate for rich countries, she noted.
"G-20 countries need new sources of demand. The developing
world has the potential, and it has the people," she said. "The
G-20 must recognize this and give development the central place it
deserves in its agenda."
Like most international gatherings, the G-20 meeting has its
critics. South Korean labor union activists gathered in front of
Busan's city hall Friday, accusing the group of being "a bunch of
elitists who fail to deliver action."
"We, the honest public, are the ones suffering from the
consequences of the financial crisis because these leaders aren't
resolving the fundamental problem," Jung Yong-geon of the Korean
Federation of Clerical & Financial Labor Unions said. "They only
speak of more strictly regulating financial capital, never
executing any policies."
The G-20, founded in 1999, shifted its focus to crisis
management after the 2008 collapse of U.S. investment bank Lehman
Brothers.
Managing the European debt fiasco and resulting market turmoil
has recently overshadowed longer term efforts to reform banking
regulation and set up financial safety nets for countries emerging
from crisis.
The finance ministers last met in Washington in April. They are
preparing a communique to be issued Saturday.
South Korea, which emerged from poverty to become a technology
and industrial powerhouse, assumed the rotating G-20 chair this
year and will convene a summit in November in its capital, Seoul.
It favors including development in the G-20 agenda.
Agreement is far from certain on proposals for a bank tax to pay
for future bailouts, but others such as Canada and Australia oppose
it given that their banks weathered the global crisis intact.
Geithner declined to say if the U.S. wants the G-20 to adopt a
global target of 12 percent of an institution's assets being held
as a capital reserve - one option being considered. That would
represent an increase from a current U.S. target of around 8
percent.
"We want to find a balance between making sure that these firms
run with much more conservative, much stronger cushions against
loss in future crises," he said, refusing to say what target was
being considered.