Spotlight G20: Greek tragedy sours Summit

Martin Khor, part of our 2011 Spotlight G20 Series

Last week saw pure drama on an epic scale as the Eurozone plan to exit its debt and currency crisis almost crumbled when the Greek Prime Minister announced he needed a national referendum to approve a bailout programme.

This bombshell came last Monday on the very eve of the G20 Summit in Cannes which had been expected to cheer the European leaders for finally getting their act together.

Instead, the G20 Summit became another new act in the Greek and Euro tragedy.

The summit concluded last Friday without any concrete results. “Global recession grows closer as G20 summit fails,” warned the London Guardian.

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Spotlight G20: Beyond the G20: Mitigating the Costs of Global Imbalances in the Absence of Global Coordination

Kevin P. Gallagher, part of our 2011 Spotlight G20 Series

The absence of a global regime to prevent and mitigate financial crises and a reluctance to resort to the International Monetary Fund for assistance has led emerging market and developing countries to accumulate vast sums of foreign reserves as an act of ‘self-insurance’. If a nation has a backstop of foreign reserves and an external shock such as a financial crisis results in capital flight from such a country, the nation can use those reserves to stabilize the currency.

The insurance incentive was acute in the run up to the crisis, but the incentive to accumulate reserves in the wake of the global financial crisis has been even stronger given the scale of the crisis and the lack of an adequate response to it in terms of global economic governance. Not surprisingly then, reserve accumulation in developing countries has not only continued to increase in the wake of the crisis, but has increased at a faster rate than previous to the crisis. What is more, excess reserve accumulation has been costly at both the national and global levels. Nationally, because the opportunity cost of accumulating reserves can be high, globally because of the global imbalances created by surplus and deficit nations.

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Spotlight G20: Who Calls the Shots on Food Security?

Frequent Triple Crisis contributor Sophia Murphy analyses the G20’s chilling effect on strong initiatives at the UN level to address food security issues, in a new commentary from the Institute for Agriculture and Trade Policy. It builds on Jennifer Clapp’s recent blog post and the recent interview with Clapp and Timothy A. Wise:

ROME, OCTOBER 2011 – Multilateralism is in crisis. It is perhaps most evident in the painful and truly frightening failure of governments to come to grips with the implications of climate change. But it was also evident on a much less well-publicized stage in mid-October in Rome, where governments were gathered at the U.N. Committee on Food Security (CFS) to discuss food price volatility…

Read the full commentary.

Spotlight G20: Emerging Economies Join G20 Coalition to Tax Speculation

Sarah Anderson, guest blogger, part of our 2011 Spotlight G20 Series

Talk about piling on. Bill Gates, the Pope, the Archbishop of Canterbury, 1,000 parliamentarians, 1,000 economists, the world’s major labor leaders, Occupy Wall Street protestors, Oxfam and other major development groups, thousands of nurses, the World Wildlife Fund and other major enviros, Michael Moore… It might be easier to list who didn’t come out in support of a Wall Street tax in the lead-up to this week’s G20 summit in Cannes.

The outcome?  No home run, but some measurable steps forward.

No one expected a G20-wide agreement on taxing financial transactions at this summit.  Despite rising support, opposition from the United Kingdom, Canada, and the United States, among others, is still just too strong.  But there were high hopes that a subset of European and non-European G20 countries would launch a “coalition of the willing” in support of the tax.

This goal was achieved.  In his concluding press conference, summit host French President Nicolas Sarkozy announced that South Africa, Brazil, and Argentina were joining the list of current supporters, which inlcude France, Germany, Spain, the European Commission, and several other European governments.  Sarkozy said he hopes to move towards implementation in early 2012.

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Spotlight G20: The eurozone debt crisis and the G20

Kevin P. Gallagher, part of our 2011 Spotlight G20 Series

As Tuesday’s headlines from Greece prove, the latest eurozone rescue plan is far from a long-term solution. But it should prevent this week’s G20 meeting from being completely hijacked by Europe‘s short-term woes.

Instead of another round of fire-fighting, the G20 should address the larger issue of a mechanism to prevent sovereign debt crises in the future from spiraling like this one. If they don’t, Greece and defaulters of the future will suffer the fate of Argentina – a nation whose sovereign debt restructuring threatens to be taken over by trade and investment treaties.

As political economist Eric Helleiner has shown, with every crisis comes a new proposal for a sovereign debt workout mechanism that meets a sticky end. Mexico proposed a mechanism in 1933; the United States a mechanism in early drafts of the IMF articles of agreement in the 1940s; UNCTAD saw such a regime as core to a “new international economic order” in the 1970s; and most recently, the IMF issued a call for a sovereign debt restructuring mechanism, in 2001 in the wake of Argentina’s financial crisis.

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Spotlight G20: G20 Resource List

As the G20 Cannes Summit comes to a close, as part of our 2011 Spotlight G20 Series Triple Crisis recommends checking out the following resources to make sense of what was and was not included in the G20’s agenda and why.

G20 Information Centre, Munk School of Global Affairs, University of Toronto: The G20 Cannes Summit 2011: A New Way Forward
Center for Global Development, Development and the Cannes G20 Summit
Thomas Bernes (CIGI), Prescriptions for the G20: The Cannes Summit and Beyond
Uri Dadush, G20 Must Help Manage Eurozone Crisis
Financial Times Special Report, Overview: Dark outlook piles pressure on leaders
Kevin P. Gallagher, The Eurozone Debt Crisis and the G20
Jose Antonio Ocampo, Stephany Griffith-Jones and Kevin P. Gallagher, The G-20’s Helpful silence on capital controls
Andrew Sheng, The Coming Global Credit Glut
Barry Eichengreen, The G20 and Global Imbalances
IMF’s Special Report to the G20 and Paul Krugman’s response, Surprise Anti-Austerians
Jeffrey Sachs, Obama, the G20, and the 99 Percent

Spotlight G20: Brics should condition Euro bailouts on growth and more say

Kevin P. Gallagher, part of our 2011 Spotlight G20 Series

As the Eurozone crumbles before them, European leaders are begging for help to bailout Greece and create a facility to insure that the crisis doesn’t sweep through Italy, Spain, Portugal and beyond.  For the last sixty years the United States would have been the nation to step up and lead with ideas and resources to the rescue.  Sadly, the US is nowhere to be found: out of ideas and out of cash.  In desperation, Europe has turned to the BRICs.  Rather than direct bi-lateral payments, the Brics are starting to say that they prefer to channel their resources through the IMF. Brics shouldn’t let this crisis go to waste.

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Spotlight G20: Learning from Latin America

Fander Falconi, part of our 2011 Spotlight G20 Series

At the October meeting of G-20 finance ministers the only interesting item of note was a return to the discussion of a tax on international financial transactions, or “Tobin tax”. In 1971, the American economist and Nobel laureate  James Tobin, proposed this initiative to reduce speculative activity international. This initiative garnered international support, even by the organization Association for the Taxation of financial Transactions and Aid to Citizens (ATTAC), which has the backing of the European Union. The measure was not supported by the United States or China.

Everything else in that meeting was mutual recrimination about passivity in the face of a deepening economic crisis and the replay of an old script: neoliberal structural adjustment, reduced spending and public consumption. These policies have left a number of European countries, such as Greece, on the verge of bankruptcy.

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Spotlight G20: The G20 and the New World Order

Sarah Anderson, guest blogger, part of our 2011 Spotlight G20 Series

Signs of a New World Order are everywhere here in the French Riviera, as the elite city of Cannes hosts the G20, the ultimate elite club. The local business rag, the Riviera Times, trumpets a recovery of the tourism business during the 2011 summer season – thanks to a 50 percent increase in visitors from China.

In my hotel lobby there are stacks of China Daily, but no such freebies from the newspapers of the Old World Order powers. Walking by the kiosks, though, I see European headlines rejoicing at the likelihood that China will aid in the Greek bailout. The head of the European Financial Stability Facility, the pot set up to rescue basket case countries, traveled to Beijing last week and rattled a tin cup for donations from China’s $3 trillion reserve fund. This comes amid news that Chinese investors have acquired distressed Swedish carmaker Saab. (They already own Volvo.)

How will China’s juggernaut status affect the G20’s agenda?  In both positive and negative ways, in my view. On the positive side, they could hold some of the other governments’ most extreme free market tendencies in check. Take, for example, some of the positions the Obama administration is pushing in bilateral and regional free trade agreements. In the recently signed treaties with Panama and Colombia, they pushed through new rules that ban the use of capital controls, despite the fact that many countries are using these policy tools to combat financial volatility and the International Monetary Fund is recommending them in certain circumstances. The Chinese government, a capital controls user, would never go along with it if the Obama administration tried to push such nonsense at the global level.

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