Brussels, 07/09/2015 (Agence Europe) - On Saturday 5 September, the 'G20 Finance' agreed to take “decisive” action to keep economic recovery on track, whilst taking steps to avoid falling back into account-productive monetary war.
Although they welcomed the strengthening of the economy in certain economies, the world's major finance ministers and central bank governors noted that “global growth falls short of our expectations”. In order to support their economies, the participating countries reiterated their commitment to apply their 'growth strategies', which “include measures to support demand”, with a progress report expected for the next summit of the G20 (Antalya, 15-16 November). Although monetary policies - such as European-style 'quantitative easing' - will continue to support activity, these policies “alone cannot lead to balanced growth”, states the 'G20 Finance', which asks its members to “refrain from competitive devaluations” and “resist all forms of protectionism”. Additionally, in order to minimise negative spillovers, all economic and monetary policy measures must be carefully calibrated and clearly communicated.
The monetary policymakers appear reassured by the explanations provided to them in Ankara by the Chinese delegation regarding the surprise evaluation of the yuan in early August, which triggered a stock-market storm and the beginnings of a currency war in several countries. Furthermore, although the 'G20 Finance' notes that “monetary policy tightening is more likely in some advanced economies”, the Director General of the IMF, Christine Lagarde, has asked the American FED to ensure that all of the necessary information is at hand before any decision is made on increasing its key interest rates. This decision, which could be announced on or shortly after 17 September, could lead to an influx of capital to the United States in search of yield, which would make things even harder for the emerging countries.
Regarding the issue of sovereign debt, the world's principal economies note progress in the inclusion of collective action and pari passu clauses in international sovereign bond contracts, in order to make it easier for debts to be restructured, if necessary (see EUROPE 11145).
On the reform of the financial architecture, the 'G20 Finance' expressed its hopes that the future total-loss-absorbing-capacity standard safety net (TLAC), to be adopted by the world's 30 largest banks from 2019, will be finalised ahead of the Antalya summit. It sets the same deadline to see tangible progress on the solvency and resilience of central counterparties for derivative products. It goes on to recommend the removal of the “legal obstacles” in the reporting of over-the-counter derivative transactions in the central registers.
As regards the fiscal issues, the monetary policymakers state that the 15-point action plan to stop the tax optimisation measures of multinational companies ('BEPS' action plan) will be ready by “October”, ahead of their next meeting, on the sidelines of the joint IMF/World Bank conference meeting (Lima, 9-11 October), so that the action plan can be presented at the Antalya summit. (Mathieu Bion)