This year’s cycle of Group of 20 meetings comes to a sputtering close Monday in Mexico City, as finance ministers show little resolve to overcome differences that have hindered a comprehensive international response to a weakening global economy.
Germany has sought to shift the focus from Europe’s woes by highlighting the severe fiscal challenges faced by the United States and Japan, while the U.S. continues to characterize Europe’s sovereign debt crisis and recession as the biggest barrier to a stronger recovery.
Smaller countries such as Australia and Canada called on the world’s biggest economies to clean up their messes, while offering no fresh initiatives of their own.
“While economic growth in Canada is projected to remain strong compared to other developed nations, Canada is not immune to international developments,” Finance Minister Jim Flaherty said in a statement Sunday, released as he made his way to the Mexican capital for a dinner meeting with his G20 counterparts and central bankers.
“Our government will continue to call for measures that will address risks and persistent weaknesses in the global economy,” he added, without details.
There is plenty to discuss, but it feels like officials are going through the motions.
As the economy stumbles, leaders remain short on specific solutions.
The International Monetary Fund last month revised down its forecast for global economic growth this year to 3.3 per cent from 3.5 per cent, and cut its outlook for 2013 to 3.6 per cent from 3.9 per cent. The world’s gross domestic product advanced 5.1 per cent in 2010.
“It’s clear most of my G20 colleagues view the global recovery as fragile,” Australian Treasurer Wayne Swan said in his weekly economic commentary, published Saturday. “It’s critical that leaders of many major economies now get on with the necessary structural reforms needed to underpin growth.”
Discussions Monday were expected to be dominated by what Europe is doing to resolve its debt crisis; the U.S.’s “fiscal cliff” – the more than $500-billion (U.S.) in spending cuts and tax increases that could cause a new recession if unaltered; and the overhaul of international banking standards, which is falling behind schedule.
The officials preparing the concluding statement for their ministers were set to present a text that would describe global growth as “modest” and risks as “elevated,” Reuters reported, citing a person familiar with the draft document. The statement identifies the key risks as “possible delays in the complex implementation of recent policy announcements in Europe,” potentially “sharp” fiscal tightening in the U.S. and Japan, weaker growth in emerging markets, and “additional supply shocks” in some commodity markets, the report said.
But acceptance of the seriousness of the situation is where agreement ends.
Non-Europeans appreciate that the euro-zone governments have made significant strides, but remain frustrated with the pace of implementation. Washington’s appetite for political brinksmanship over issues with the potential to roil global markets baffles the rest of the world. The Basel Committee on Banking Supervision and the Financial Stability Board reported last week that the G20 likely will miss several of its end-of-2012 deadlines for new financial standards.
An extremely close race for the presidency has crippled policy making in the U.S. for much of the year, and no American official will be able to promise much at the G20 gathering, held on the eve of the U.S. vote.
But there also are signs of fatigue with the process. The G20’s top economic officials saw each other a few weeks ago at the IMF’s annual meetings in Tokyo. That could be hurting attendance in Mexico City. Several key figures, including U.S. Treasury Secretary Tim Geithner, European Central Bank president Mario Draghi and the finance ministers of Brazil and France, are no-shows in Mexico. Their absence raises serious questions about the relevancy of the G20, which was anointed as the main co-ordinating body for economic policy in 2009.
The G20 needs a break. The first move of Russia, which inherits the presidency from Mexico in 2013, should be to press the reset button.