Arctic G7 meeting ends with cautious optimism
Finance ministers from the world’s leading industrialized countries expressed quiet confidence that their efforts to reverse the global recession are working.
The ministers from the Group of Seven countries, who met with central bankers over the last 24 hours in Canada’s northernmost capital, gathered as tumultuous financial markets suggest that confidence in the recovery is waning.
Finance Minister Jim Flaherty, the host, acknowledged at a press conference that the rebound from the deepest global recession since the Second World War is not yet “firmly established,” but that there still are “good signs” that the worst is over and the economies of the seven countries present are on surer footing.
The curious choice of location was meant to create a less formal atmosphere for frank discussion about the way forward.
In keeping with that theme, they made no announcements. Nor did they make pledges beyond staying the course on previously announced stimulus commitments, designing exit strategies for a return to a global economy driven by the private sector instead of public spending and significantly overhauling international financial regulations.
Finance chiefs from the United States, Japan, Germany, Britain, France, Italy and Canada indicated that their talks had hardened their resolve to work together to do their best to avoid a repeat of the financial crisis.
“What matters is not just being here, but what we decided,” British Chancellor of the Exchequer Alistair Darling said. “I think we can be confident, although we remain cautious, that we are on the right path.”
In a break with the past, the G7 ministers issued no statement summarizing the proceedings. Mr. Flaherty read a short statement at the beginning of the press conference, which he chaired strictly, taking most of the questions himself, limiting the opportunities of his counterparts to weigh in on the issues.
Whether by accident or design, the limited offering of information and commentary contributed to Mr. Flaherty’s efforts to turn a collection of countries that once acted as the steering committee for the global economy into a forum for like-minded nations to hash out issues and build trust.
At a time when countries such as China, India and Brazil factor in the effective running of the global economy just as much or more than the G7 nations, it made little sense to stake out new strategies or lecture governments that weren’t present to defend themselves.
According to Mr. Flaherty’s summation, he and counterparts stuck to issues over which they have direct control. They discussed currency issues, but didn’t get carried away without China and other emerging markets there to participate. In doing so, they also avoided offending China. The government's refusal to allow the yuan to rise frustrates the G7 ministers, yet it's become clear that the best place to have that debate is at meetings of the larger Group of 20 nations.
"China is quite senstitive to this," said Gregory Chin, a senior fellow at the Waterloo, Ont.-based Centre for International Governance Innovation and a former Canadian diplomat in China. "They will watch to see how the U.S. leverages the G7 to put pressure on China."
The major topic was banking and insurance regulation and how to change it to avoid a repeat of the financial crisis, which started on Wall Street, London and other G7 financial centres.
Going into the meeting, which started Friday over a dinner of roast caribou caribou medallions and arctic char and ended Saturday over a lunch of caribou tortiere, investors were expressing concern that the G7 was beginning to diverge on financial regulation, which risked a scattershot approach that could undermine confidence.
Finance chiefs sought to reassure markets that they still are on the same page, even if it sometimes doesn’t look like it.
“We all have somewhat different systems and these common standards we’ve put in place are going to have to be complemented by slightly different approaches at the national level,” U.S. Treasury Secretary Timothy Geithner said at the press conference. “What you saw today was not a divergence in approach but a strong commitment together to try to make sure we’re putting in place the kind of strong reforms that would prevent these kinds of crises from happening again.”