Brussels, 12/11/2010 (Agence Europe) - On Friday 12 November, the G20 summit in Seoul ended with world leaders expressing their resolve to ease wrangling over economic and monetary policy but did not achieve a true breakthrough. Europeans boast of leading the way when it comes to handling macroeconomic imbalances that will be anticipated and analysed by a whole series of indicative guidelines still to be defined. South Korea, which hosted the summit, enjoyed success on reform of IMF governance and on the introduction, by 2019, of increased capital and bank liquidity requirements.
“We have committed to reducing excessive imbalances and maintaining current account imbalances at sustainable levels”, the presidents of the European Council and the European Commission, Herman Van Rompuy and José Manuel Durão Barroso, crowed, adding: “Our method of using indicators to trigger assessment of macroeconomic imbalances and their root causes was backed by the G20 leaders”. They point out that the European Union has launched a legislative process aimed at creating a “robust” macroeconomic oversight mechanism that will allow risks such as the creation of real-estate bubbles and major losses of competitiveness to be detected, using indicators still to be defined (see EUROPE 10247). According to the statement adopted by G20 leaders, an internal working group is entrusted with the task of developing, in cooperation with the IMF, a series of indicators that would “serve as a mechanism to facilitate timely identification of large imbalances that require preventive and corrective actions to be taken”. The G20 on Finance in the spring will take stock of this issue in the first half of 2011 with a view to making a first analysis of global macroeconomic imbalances, under French presidency in 2011.
Monetary exchange rate. As far as the spat over currencies was concerned, the summit simply took on board the wording suggested at the end of October by the G20 Finance in Gyeongju (see EUROPE 10243). Exchange rates should be more market-determined and reflect economic fundamentals. All countries will refrain from carrying out competitive devaluation to support their economies. Advanced economies, including those with reserve currencies, will be vigilant against excessive volatility and disorderly movements in exchange rates. These actions will help mitigate the risk of excessive volatility in capital flows facing some emerging countries. “The EU helped to build consensus on concerted solutions to the tension over monetary and trading issues”, Van Rompuy and Barroso said.
Basel III. Internal Market Commissioner Michel Barnier welcomed the G20's decision to endorse the new international requirements for banks' own funds (the so-called “Basel III” regulation - see EUROPE 10213). In a press release he states that all banks must manage their capital better and set in place larger liquidity guards so that they may fill their main function - that of lending money to the real economy. He underlines how important it is for these rules to be applied simultaneously by all member states. The Commission will present its legislative proposals in March 2011.
According to the G20 leaders, “no firm should be too big or too complicated to fail and taxpayers should not bear the costs of resolution”. The G20 took a stance in favour of a regulatory framework compelling financial institutions of systemic importance, and above all entities of global scale, to be still more able to offset major losses and to submit to closer prudential control. It is up to the national supervisors to reflect on more stringent measures for the holding of liquidities, exposure to major risks and taxation.
Concluding Doha in 2011. The G-20 confirmed its commitment to combat protectionism and to conclude the multilateral Doha Round of talks. According to a recent World Bank report, a joint statement overflowing with promises from 17 of the 20 main global economies, and hardly in keeping with the restrictions in trade since the London summit at the end of 2009, underlines their commitment in favour of free trade, recognising its capital importance for economic recovery. They say they will refrain from raising protectionist barriers and will be opposed to protectionist action of any kind, and that they recognise the importance of coming to a swift conclusion of the Doha Round. Published at the end of October, a Commission document also identified more than 330 restrictive measures taken by the main EU partners since autumn 2008. The leaders express their “strong commitment to direct our negotiators to engage in across-the-board negotiations to promptly bring the Doha Development Round to a successful, ambitious, comprehensive and balanced conclusion”. They go on to add that they acknowledge that 2011 provides a crucial but small “window of opportunity” for obtaining success. Once the work is accomplished, they also undertake to gain ratification of the agreement, as appropriate, in their respective systems. The WTO is already counting on a ministerial conference in mid-December 2011 in Geneva to complete, once and for all, a Round begun in 2001. (E.H./M.B./transl.jl)