24 June 2010

G20: sense of urgency has faded

The G20 members will warn against taking the global economic recovery for granted while also noting that the huge costs of stimulus could hurt long-term growth, a draft G20 document shows.

The G20 members will warn against taking the global economic recovery for granted while also noting that the huge costs of stimulus could hurt long-term growth, a draft G20 document shows.

 

The G20 must still forge consensus on controversial topics such as how quickly to shrink government deficits, how best to strengthen banks so that they can withstand any new downturn, and how to harmonize financial regulatory reforms, Reuters reports commenting on a draft version of the summit communiqué.

 

The European Union formally requested in a letter on Wednesday that the G20 explore a tax on banks and financial transactions.

 

Canada has led opposition to bank taxes, arguing that there is no need for a one-size-fits-all rule because some countries weathered the financial crisis well.

 

The financial reform measures may fail without coordination and without some harmonization of rules and regulations, global financial institutions could go where the regulation is lax.

 

There's not as much heated disagreement over financial rules as there is over fiscal policy, but there is no consensus either.

 

The Europeans will press for a global tax on banks and financial transactions to help pay for the costs of financial crises, but that idea has little support elsewhere.

 

Obama hopes to have a completed financial-reform bill in his pocket to show off to the others, but some of the big questions -- capital requirements, leverage limits, and global resolution authority -- need to be harmonized.