CBC News
Saturday, November 5, 2011

Former PM says bolstering of banking watchdog a 'major step forward'

Former Canadian prime minister and finance minister Paul Martin says he found the outcomes of this week's G20 summit "heartening," but would watch closely for commitments to follow through on details.

Among the encouraging developments from the round of talks in France, Martin told CBC News on Saturday, was an agreement to provide oversight for Italy, to be administered by the International Monetary Fund and the European Union.

The decision to have the IMF and EU monitor Italy's finances would be a preventative measure to ensure it doesn't slip into the same debt problems plaguing Greece.

"Italy is the elephant in the room," said Martin, who participated in several G20 meetings with major world economies during his years in politics.

IMF surveillance a 'major step forward'

"It's a horse of a different colour. The indebtedness is so large, the problems are so large, and they have to have an assurance that [Italian Prime Minister Silvio] Berlusconi is going to carry through."

Martin called the nomination of the IMF to provide surveillance "a major step forward," as Italy's borrowing rates threaten to soar beyond manageable levels. Borrowing rates rose above six per cent this week.

Overall, Martin said, "There were a couple of things that are are really quite heartening" from the two-day summit.

The scrapping of a proposed referendum on the Greek bailout package was hailed as a success.

Another key accomplishment from the summit, according to Martin, was the newly empowered Financial Stability Board, which will have added responsibilities as a watchdog for global banks.

Martin applauds Carney appointment

In a joint communiqué released Friday, the G20 said the board would be reformed "to improve its capacity to co-ordinate and monitor our financial regulation agenda." The board will also be given greater financial autonomy.

The broadening of the board's powers has been something Martin has long pushed for, he told CBC News, adding he was doubly happy Bank of Canada Governor Mark Carney will serve as chairman.

"Even more important is the fact that Mark Carney has been named to head it," Martin said. "Because Mark Carney has made it very clear that he is taking this job on, and will make sure the Financial Stability Board is to ensure common minimum standards and strengthen the degree of global national regulation with co-ordination in banks."

On the topic of employment rates, Martin said today's global economy is so integrated that the state of Canada's labour market could hinge on how well other world markets can be propped up. To that end, he said, the G20 must succeed if Canada is to create the kinds of jobs it needs. If the Greek and Italian economies falter, the reverberations could be felt in Canada.

"The fact is our job market in Canada was affected by the tsunami in Japan; our automobile market is being impacted by the floods in Bangkok," Martin gave as examples. "In both those cases, you had the provision of auto parts that form part of the cars that we build here."

Talks 'sidetracked' by debt issues

The G20's joint communiqué promised to reform financial industries to prevent a repeat of the excesses that have prompted worldwide Occupy protests. There were also pledges to invest in research to improve farm productivity, reform energy subsidies that encourage waste, and create jobs for young people.

But the eurozone financial crisis might mean governments are not paying enough attention to the long term, warned Daniel Schwanen, an economist at the Ontario-based Centre for International Governance Innovation, an independent think-tank.

"Where is the employment agenda? Where is the growth agenda?" he said. "We've been sidetracked by the emergency debt issues."