Finance Minister Jim Flaherty says the G20 is “drifting,” and urged his colleagues to refocus on concrete measures that would safeguard the world economy.
Mr. Flaherty, one of the longest serving ministers on the G20 circuit, made the comments after meeting his counterparts for dinner Thursday and for more formal talks Friday morning.
The meetings were held in Washington, and the talks were overwhelmed by the shutdown of the U.S. government and the possibility that political intransigence could prompt the world’s most powerful government to default on its debt.
Finance ministers and central bankers issued a rare rebuke of the United States Friday, calling on the country’s leaders to take “urgent action to address short-term fiscal uncertainties,” a reminder to American politicians that any damage they cause at home also would be felt abroad.
The G20 is a grouping of the world’s major economies, including countries such as the U.S., Germany, Australia, Brazil and India. It was brought together at the leaders’ level by former U.S. President George W. Bush in 2008 to help fight the financial crisis.
One of the strengths of the G20 is that it offers a closed-door setting for ministers to apply moral suasion. The meetings also can work the other way: as an opportunity for officials to correct misunderstandings by providing their counterparts with a deeper understanding about what is going on in their economies.
Despite the finger wagging in the official statement, Treasury Secretary Jacob Lew and Federal Reserve Chairman Ben Bernanke appeared to have calmed the nerves of at least some ministers. Mr. Flaherty told reporters that he was “encouraged” by what he has heard in Washington about the budget impasse.
American lawmakers “are all aware of the seriousness of the situation and the impact on the global economy should there not be a deal,” said Britain’s Chancellor of the Exchequer, George Osborne.
Yet Mr. Flaherty wants the G20 to aspire to be more than just a talking shop.
In the 2008 crisis, the G20 drew up specific plans to boost global economic growth, including a co-ordinated effort at fiscal stimulus. By almost all accounts, the program worked. There was hopeful talk of a new era of global co-operation. President Barack Obama in 2009 at a meeting in Pittsburgh anointed the G20 as the world’s primary vehicle for international economic co-ordination.
But the G20 has proved to be better at fighting fires than at rebuilding homes. International Monetary Fund head Christine Lagarde said this week that the G20’s promise to overhaul financial regulation remains a “mission to be accomplished.” The G20 appeared to have little influence over the European debt crisis. China mostly has ignored pressure to loosen its controls on its currency.
The original meeting of the G20 with Mr. Bush was a “very focused, directed meeting about what needed to be done to solve significant global economic problems,” Mr. Flaherty said. “I think we have drifted a bit from that focus.”
Mr. Flaherty said he raised the issue this week in Washington, but declined to say how his message was received.
“I hope we’re persuasive,” he said. “It’s a shared concern … There is a concern we are wandering a bit and not focusing on the global economic issues that are pressing.”