Brussels, 22/09/2014 (Agence Europe) - The world's finance ministers have laid emphasis on the “crucial” role played by investments in stimulating demand and increasing economic growth.
“We have agreed to a Global Infrastructure Initiative to increase quality investment, particularly in infrastructure. The Initiative will seek to implement the multi-year infrastructure agenda, including through developing a knowledge-sharing platform”, stated the “G20 Finance” in the final communiqué it adopted in Cairns (Australia) on Sunday 21 September. This initiative will include “key measures” aiming to support the business climate, a central element in attracting private investment. The communiqué goes on to stress that “in implementing our growth strategies, we will seek to support quality public and private investment, including by optimising the use of the public balance sheet while maintaining appropriate risk controls”. The G20 leaders will present a mechanism of this initiative in favour of investment in infrastructure at the Brisbane Summit on 15 and 16 November.
The measures presented by the members of the G20 to support economic activity should help to increase average wealth by “1.8% by 2018”. This is less than the “G20 Finance” had hoped for in February, due to the downside risks inherent in the “financial markets” and as a result of the “geopolitical tensions” which continue to hamper growth (see EUROPE 11025).
In Cairns, Europe's policies came under fire from the United States and Canada for failing to do enough to support growth. The American Secretary of State for the Treasury, Jack Lew, referred to “philosophical differences” with his European counterparts in such matters.
Financial regulation. The finance ministers and central bank governors stressed that they are “mindful of the potential for a build-up of excessive risk in financial markets, particularly in an environment of low interest rates and low asset price volatility”.
It is “extremely important” for the G20 to reach a final agreement on the question of banks which are too large to fail, stressed the Commissioner for the Euro, Jyrki Katainen. The fact that the “principle of the 'bail-in' is broadly accepted at global level” is “good news” for the banking sector itself, because this creates a level playing field, and also for the public sphere, in that instruments for an orderly resolution of banking crises will be in place. Between now and the G20, the Financial Stability Board (FSB) will put forward a definitive proposal on increased requirements in terms of the capacity of the financial institutions in question to absorb losses, which will then be submitted for consultation and an impact assessment from a quantitative point of view. Annual consolidated reports on the implementation of the financial reforms agreed globally will be published from 2015 onwards.
Taxation. The “G20 Finance” approved the raft of measures aiming to fight the tax optimisation operations of multi-nationals, the “BEPS” project of the OECD (see EUROPE 11156). Seven of the 15 OECD recommendations were presented in Cairns and aim to “energetically fight practices to reduce basic tax and artificially to transfer companies' profits to low-tax or no-tax countries”, said OECD Secretary General, Angel Gurria.
The Commissioner for Taxation, Algirdas Semeta, welcomed the commitments made this weekend, but stressed that this is just the first stage, albeit an important one. The fight against harmful tax practices, such as “patent boxes” (tax regimes favourable to patents), will be stepped up a gear in 2015. The G20 has increased the pressure on Luxembourg, the Netherlands, Spain and the United Kingdom to secure an agreement on the issue of these “patent boxes”. Germany, the United States, France and Italy have sent out a “clear message to those lagging behind”, calling on them to make changes to their practices, announced the French Minister, Michel Sapin. The pressure made itself felt in June, when the Ecofin Council decided to assess these regimes within the EU by the end of 2014 (see EUROPE 11106).
The “G20 Finance” also turned up the pressure on 14 countries in which transparency has been deemed insufficient, Sapin went on to explain. Forty-seven states have already agreed to exchange their information from 2017. They will be joined in 2018 by eight members of the G20 plus New Zealand. (MB and EL)