Inevitable disagreements. Is it actually possible to decide on the outcome of the G20 as far as Europe is concerned? I admire commentators who have already gauged the outcome of the summit from the global viewpoint, and I also admire the political forces that are already describing - in advance - how the summit will impact on the global economy - and are reaching different conclusions, as it happens. Some say that a new epoch is opening, while others say the summit was a failure. How can these hopes, fears and ambitions be summarised for Europe, and more specifically the EU? Even within Europe, views are mixed. Each economist, politician and commentator has his own opinion, preferences and firm belief that he is right. The idea that compromise was inevitable if an agreement was to be reached never even enters their heads, and each one believes he, and he alone, holds the divine right to discern the truth. This is what is giving rise to all the lamenting and gnashing of teeth.
Take the example of huge bonuses for City traders. Germany and France were calling for strict upper limits. The United States and the United Kingdom opposed this. The compromise deal was therefore the introduction of detailed rules without specific upper limits. The commentators who are outraged about this simply ignore the fact that the current vacuum encourages traders to take too much risk and the rules that were agreed upon are huge progress compared with the situation that led to the crash, the sharp hikes in oil prices and the seesawing of the price of cereals, with the tragic repercussion on the billions of people living in abject poverty in the world. The public at large are disgusted at the mammoth bonuses but experts say that in reality, the bonuses have less of an impact than surveillance of the markets and tax havens. Even if it's true, the sheer scale of the abuse was unacceptable and a compromise was required. The compromise might not quite go far enough but it certainly exists.
Confirmation of an economic system. As far as Europe is concerned, the full range of G20 achievements should be viewed in the same measured manner. Nobody is entirely satisfied with the outcome, of course, but that is unavoidable in multicultural and politically fragmented Europe. The “social-market” system still has the support of the clear majority, as the elections in Germany have shown. It is easy to talk down and decry the European system but it is a fact that it is the system that has increased the standard of living to a greater extent and provides better welfare than anywhere else in the world. OK, it needs constant tweaking and fine-tuning, but only a handful of people recommend getting rid of it. The havoc wreaked by the financial world and its powers is disgusting, those responsible for some of the abuse should be punished more severely and prevented from ever being able to inflict damage again and there is much that has to be improved when it comes to ethics and behaviour. The role of the financial world has been queried in the most overt way - if banks do not lend to business, “What is the point of them?” A British politician, Adair Turner, says that most of the activity of the world of finance these days is “socially useless”. Off-balance sheet sales have to be controlled and restricted in order to prevent pure speculation. A world governed by banks is not a pretty sight and people will not put up with such a sorry state of affairs any longer. The social-market economic model, however, is not being criticised and nothing suggests that extreme views are taking hold among the masses in Europe, despite the clamour for things to be put straight.
Controversial results. Pittsburgh did not go far enough and some sections of the final G20 statement do little more than simply list objectives and a handful of deadlines. All the same, an astonishing amount has been achieved in the space of a few months. The summary of the final statement that we published in yesterday's newsletter in three separate articles (Radical overhaul of the world of finance; Agreement on Doha; and Disappointing results on tackling climate change) is both concise and comprehensive. The main section, on business and finance, gives clear guidelines and timelines for some action, some in the very near future (this spring for penalising tax havens), others further down the track (the end of 2010 for banks' own capital requirements) or gradual (before the end of 2012 for derivatives and at-risk financial products). Taxing financial deals (the “Tobin Tax”) was not mentioned and some critics suggest this means that a travesty of taxation is doomed to emerge. Reform of the IMF has been announced but EU countries disagree among themselves about the details. The G20 admitted that when it comes to an exit strategy to restore healthy public budgets, the situation around the world is very uneven and different action will be needed in different places. The EU argues that an exit strategy is essential because the stability and international status of the euro depend on it.
I will be returning to this question in the future, along with other issues, like the institutional impact of the G20's new status and role. (F.R./transl.fl)