The program of meetings of the French President and host of this year's G20 summit, Nicolas Sarkozy, on this Wednesday evening preceding the summit, is very revealing.
Mr. Sarkozy will have a meeting with IMF Director Christine Lagarde, German chancellor Angela Merkel, the President of the European Commission and the President of the European Council. So, this will be a meeting of key European leadership with the IMF.
Then, Mr. Sarkozy will hold bilateral talks and a working dinner with Chinese President Hu Jintao. Following this, Mr. Sarkozy will re-join Ms.Merkel, and together with her and representatives of the IMF and European institutions, will meet with Greek Prime Minister Papandreou and Finance Minister Venizelos.
What does this planned sequence of events preceding the formal opening of the summit suggest? It suggests that the G20 leaders do not want lingering questions about how the Greek debt crisis will ultimately be resolved, to overshadow the other important issues that the group must address. A credible path forward on European sovereign debt is a necessary, but not sufficient, element in ensuring the strong, stable and sustainable growth that the G20 ultimately pledged to deliver for the global economy.
The G20 cannot be thrown too far off course – it needs to address crises as they arise, but each crisis underscore the need for the G20 to get on with key aspects of its longer-haul reform agenda. These include the unfinished aspects of the international financial regulatory agenda, and the need not only to continue improving on the way G20 countries mutual assess their policies and evaluate the spillover impact of these policies on the overall global economy, but also explain how these assessments and evaluations will lead to cooperative actions when problems are identified.
The G20 must not only avert a decline in private sector confidence, but actually nurture the latter, by working with business leaders on removing obstacles to hiring, investing and the formation of small business, that exist in each G20 country and could be removed by concerted focus. In general, it needs to implement structural economic measures that will facilitate the allocation of capital, both globally and in each country, to more productive uses than has been the case in the past decade.
If they do this, they will be able to keep to a credible path of deficit reduction for those many G20 countries for which public debt increase are currently not sustainable, knowing that the private sector will be able to pick up the slack in demand. In a similar vein of fulfilling and integrating the promises of past summits into a forward-looking agenda, the G20 should push forward with the G20 Seoul development agenda, including encouraging investments in poorer countries that could benefit both these countries and business in advanced countries.
There are many long-term issues on which the health of the world economy depend, which G20 leaders pledged to address, and which they must keep pushing at Cannes and beyond. By addressing the Greek debt emergency early in the summit, the G20 gives itself some room to discuss and implement a stronger long-term vision. Let’s see if they use that room well.
Daniel Schwanen is a CIGI Senior Fellow and is available for further comment at the International Media Center in Cannes this week.