Like most summit outputs, last week’s final communiqué from the G20 summit in Cannes is long on promises but short on details. To get a better reading on what the communiqué really says and on what the Cannes summit means for the G20 as an institution, we speak to CIGI Distinguished Fellow and former Canadian G7-8 Sherpa Gordon Smith.
CIGI: To the extent that the euro zone crisis overtook the G20 agenda in 2011, were you surprised to see such a diverse communiqué coming out of Cannes?
Gordon Smith: Clearly, it was a summit that was preoccupied by the euro crisis, and in particular Greece. The fact that there is a whole lot of things in the communiqué just reflects the reality that these summits are extensively prepared. Therefore, that work had already been done by Sherpas and by ministers of finance and was put before leaders for their agreement.
I think the real question is what all this means for the G20 as an institution. I think the meeting in Mexico (in 2012), which will hopefully be held in an environment where it won’t be challenged by a crisis, will need to more broadly try to move the G20 as an institution forward. What I’m saying is that I don’t think this meeting really did that — with one exception, which Canadians should be conscious of, and that is the appointment of Mark Carney to chairman of the Financial Stability Board. The work that CIGI has led on the G20 has stressed the importance of the FSB – that it needs to be bigger, that it needs to have more clout. I think the fact that Mark Carney was not only nominated by Canada, but also accepted by the other countries, is one of the most positive signs coming out of this summit.
CIGI: Related to that, does the language in the communiqué suggest that the G20 will give the FSB “teeth” to carry out its mandate?
Gordon Smith: I think it’s unclear. Will it strengthen the FSB? Yes. How much it will, I think time will tell. There will be discussions on this subject I’m sure. But going through crises such as this one and the one of a few years ago, advances the process of institutionalizing oversight and providing regulatory mechanisms. It’s unfortunate that we have to go through a crisis in order to get people to move off their preoccupation of questions of sovereignty, but, on the other hand, that’s reality.
CIGI: Do you consider the specific mention of Italy’s call for IMF verification of its monetary policy restructuring as a direct attempt to reassure markets? And by extension, did the focus on Greece at the Cannes summit let Italy off the hook somewhat?
Gordon Smith: Sure, I think it’s an attempt to reassure markets. But the big test for the results coming out of Cannes is on implementation. There’s obviously big uncertainty about Greece — Papandreou could lose the vote tonight and Greece could be plunged into elections. Even if he wins, it’s not clear to me that the Greek problem is over. It’s implementation in these things that is the real issue. In Italy, Berlusconi is saying that he’s going to do the right kind of things, but is he? Is he capable? He’s already going into it with a weak government, and this isn’t going to strengthen his hand. The important thing, to me, is what happens to their 10-year bonds. As they start to go up to six percent or if they get to seven, the consensus of experts is that this is a really deep crisis and Italy is much bigger than Greece, so it would be very difficult to handle.
CIGI: In the communiqué, the leaders commit to “strengthen the social dimension of globalization” and recognize “the importance of social protection floors in each of our countries.” Do you think these points are a direct response to the Occupy protests?
Gordon Smith: Worrying about the social side of globalization and saying that something must be done is nothing new for summits, so I don’t know whether it’s a direct response to the Occupy protests. There’s no question that in more and more people’s minds, the way globalization is working, both around the world but more particularly in countries, is that the gap between the very few rich and the very many others — I won’t say poor — is growing, and the actual gap between the very rich and poor has grown quite substantially. This has occurred less in Canada than in many other countries, but it’s still a big issue. So, this wording (in the communiqué) could be said to reflect that, but it’s hardly the first time that such wording has been used.
CIGI: Heading into the summit, you published a commentary urging the G20 to use Cannes as an opportunity to “abolish antechambers” such as the G7 and G8. Do you feel the leaders succeeded in this at Cannes, and what do you make of their call for the G20 to remain an informal group while formalizing the troika?
Gordon Smith: I remain of the view that the G7 and the G8 do constitute a kind of antechamber, although I realize a greater authority than me, Paul Martin, thinks that I’m dead wrong on this issue. It’s Mr. Martin’s view that if the problems are in the G7 and G8 countries, then it makes sense that they address them in the first instance. And indeed, why would China, India and Brazil want to jump into what is a European or an American dysfunctionality? It seems to me that the Chinese have been very cautious in terms of how far they’re prepared to go. They’re not looking for a leading position (in global recovery efforts).
As Mexico assumes the G20 presidency, what’s in store for the G20, both for the 2012 summit agenda and as an institution going forward?
Gordon Smith: We’ve also known that summits can be hijacked by an event — we’ve written about that subject, it’s happened before and now it’s happened again. But this summit is going to be remembered for the Greek crisis, but hopefully not for the impending Italian crisis. So what does that mean for Mexico? I think that Mexico has to work on trying to get the G20 back on its regular course. There’s much to be done in that sense, so I would be surprised if Mexico takes on some sort of initiative that enlarges the G20 agenda. The only thing I would point out is that while the images that we see on our television screens is of leaders talking during photo ops and it all looks very informal, the meeting room remains a big problem. It’s impossible to have a meeting where you have 50 chairs around the table and maybe a total of 500 people in the room, and still call it an informal meeting. I hope the Mexicans will address this, because leaders have to be really engaged in a discussion of things that interest them. In this case, there was a crisis that overtook things. I know the leaders did meet over dinner, but it’s not clear to me that they’ve established anything like the kind of atmosphere that exists in the G7 and G8. And the leaders have been very clear — they prefer that kind of atmosphere to the arena-like way in which the G20 meets. So, I hope the G20 will be able to move in that direction, toward real informality, because I think that’s more likely to engage leaders.