| G20 meeting — a drop of warm water in the cold sea |
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With international pressure on the EU to put in place an adequate response to the Euro crisis, the gathering of global finance ministers at the IMF Annual meeting in Washington has provoked a new proposal to underwrite the currency and recapitalise European banks. The crisis over the Euro has overshadowed the normal workings of the EU. The inability of EU leaders to put in place plans that stabilise the single currency and promote confidence in the market has alarmed policy makers across the globe, not only raising questions about the future of the Euro, but about the EU itself. In advance of the recent informal meeting of EU finance ministers in Poland in which US Secretary the Treasury Timothy Geithner participated he suggested that there was a need for increased integration within Europe to enable the problems to be overcome. The concern with the apparent inability of the EU to reach agreement also led to the emerging economies — which are still receiving development aid from the EU — to mobilise financial support. This concern that the European debt crisis might spill over to their economies also promoted officials from the group of 20 leading and emerging economies (G-20) discussed ways to stabilize the banking system and financial markets when they met on Thursday 22nd September. However no concrete outcome emerged fuelling doubts about securing a global solution. The resulting statement from the meeting stressed that “We, the Finance Ministers and Central Bank Governors of the G-20, are committed to a strong and coordinated international response to address the renewed challenges facing the global economy, notably heightened downside risks from sovereign stresses, financial system fragility, market turbulence, weak economic growth and unacceptably high unemployment”. While concrete measures were not identified, the group announced an “action plan” of coordinated short term and medium-term policies would be presented at the G-20 summit in Cannes in November. Participants moreover suggested that since European parliaments are expected to ratify plans to expand the flexibility of the €440 billion European Financial Stability Fund (EFSF) in the meantime, this would allow the purchase of government debt on secondary markets and enable governments to recapitalize their banking sectors. However, such plans are subject to heavy criticism by the public in many European countries, such as Germany. Experts expressed disappointment with the meeting’s outcome, raising concern over the ability of policy makers to solve the current financial crisis at all. “The G-20 statement doesn't offer anything that will boost investor confidence”, said head of FX research at Malaysia's Maybank, Saktiandi Suppat. “I think essentially the confidence building policy reaction which was needed is missing. They could have talked about the Greece situation and some concrete steps that will be taken”, he stressed. “The G20's communiqué today is a masterpiece of avoiding the specifics” writes Newsnight’s economics editor Paul Mason. Instead of coordinating their macro-economic policies and to restore fiscal stimulus, European politicians decided to “breaking up the banks, running huge fiscal deficits and printing money”. “Fiscal expansion turned to fiscal crisis all across southern Europe” and in the end “the EFSF will be used to save French and German banks, not Greece”, the expert believes. Read the G-20 outcome document here: Telegraph Read Mason’s analysis of the G-20 document here: BBC News Sources:  |
