This summit has been fundamentally different from the seven previous G20 heads of state summits since 2008. The result has been a clear break from past G20 outcomes.
First, the summit has taken place at a time with no acute global or regional economic crisis. True, the communiqué, spinning off the July communiqué of the finance ministers’ meeting in July, states that the recovery from the crisis is not complete. But the sentiment on the ground has been far more upbeat. European leaders have been strident in characterizing the European economy, including the periphery countries still struggling to revive, as having turned the corner. There’s no question that it is far easier to line up agreement on commitments or initiatives on economic policy coordination when a crisis is tearing economies apart, than when everyone is intent on viewing the crisis as history. A quick read of the communiqué suggests just that: it is full of “we reiterate…” and “we recognize the importance of…” but virtually nothing in terms of concrete decisions to advance any economic agenda.
What is regrettable is that there is simply no appetite for using this forum for an action-oriented retrospective on the factors behind the depth of the 2008-2009 crisis, or the length and spread of the European crisis — deepening financial regulation, reforming the International Monetary Fund (IMF), or assessing the IMF’s role in the prolonged euro crisis. Clearly, when leaders are keen to put the crisis behind them, the will to persist in addressing its causes has its limits, and they have been reached.
Second, the hottest issue, which was definitive for this summit — was a political/diplomatic one — Syria. There was some effort to ring-fence the Syria issue — Putin confined formal discussion of Syria to the working dinner last night, and since that dinner apparently consisted mainly of 10-minute statements rather than discussion, most of the meat on Syria undoubtedly happened in bilateral meetings (who met with whom and who did not meet with whom was a drama in itself). A clear indication of the awkwardness of this summit is that Syria is not even mentioned in the communiqué, while the press conferences of at least Presidents Obama and Hollande were almost exclusively about Syria. The take-away is that focusing attention on financial regulation, international economic infrastructure or even the underpinnings of growth is difficult when all eyes are focused on the lining up of teams on a significant military initiative.
On one economic issue there was a potentially significant decision that has largely flown under the media’s radar — the agreement among the five BRICS countries — Brazil, Russia, India, China and South Africa — to establish a $100 billion fund, the purpose of which has variously been described as infrastructure investment financing and reserve pooling for currency stabilization — technical speak for financial support to stop or control a currency crisis.
This has ominous undertones. It is a slap in the face to the Bretton Woods institutions (the IMF and World Bank) for moving slowly to enlarge voting shares of the BRICS — justifiable as the world waits for the US Congress to approve measures agreed in 2010. It is also yet another signal that these countries abhor the idea of going to the IMF in the event of severe pressure on their currencies — a particularly clear danger whenever the United States ends quantitative easing. But it also opens a can of worms — coordination with the IMF. We have just seen the enormous problems that arose in the context of the joint European Union, European Central Bank, IMF (the so-called troika) programs in Europe. The IMF has yet to figure out how to position itself vis-à-vis regional funds. This is not a distant threat. We have just seen the sharp reversals of inflows to many of the BRICS with weak fundamentals as the first talk of tapering US monetary policy easing occurred. Crises in any of these countries over the next few years cannot be ruled out. Starting down the path to regional reserve pooling is likely only to make the resolution of any crisis that might occur harder. Another issue for a future G20 agenda.