As G20 Chases Growth Goal, Members Differ On How To Get There
Financial leaders of the Group of 20 top economies remain committed to chasing higher global growth, but were divided on how to achieve it as Germany pushed back at calls from the United States and others for more immediate stimulus.
Opening a meeting of G20 finance ministers and central bankers, Australian Treasurer Joe Hockey outlined on Saturday an ambitious agenda of boosting world growth, fireproofing the global banking system and closing tax loopholes for giant multinationals.
“We have the opportunity to change the destiny of the global economy,” said Hockey, who back in February launched a campaign to add 2 percentage points to world growth by 2018 as part of Australia's presidency of the G20.
That goal has seemed ever more distant as members from China to Japan, Germany and Russia have all stumbled in recent months. Just this week, the Organisation for Economic Cooperation and Development (OECD) slashed its growth forecasts for most major economies.
U.S. Treasury Secretary Jack Lew called for the euro zone and Japan to do more to boost demand and revive activity, signaling out Germany as having scope to do much more thanks to its burgeoning trade surplus.
Berlin was none too pleased.
“We will not agree on short-sighted stimuli,” a German G20 delegate said, arguing that in most countries debt was still too high to allow for increased spending.
Germany has been under intense pressure to allow the euro zone to ease back on fiscal austerity and to boost its own economy through more government spending or tax cuts.
More than 900 individual growth proposals had been submitted and analyzed by officials, said Canadian Finance Minister Joe Oliver, the co-head of a G20 working group on growth. “We believe that these actions in total – and if implemented, and that is key – would come very close to 2 percent,” he told Reuters.
French Finance Minister Michel Sapin was certainly putting the accent on near-term stimulus.
“I want to repeat and say again that the immediate concern with the shorter term is very much expressed,” he said was his message to his G20 colleagues. “The immediate concern is really to recover growth while global growth in 2014 is still subdued.”
GEOPOLITICS A THORN
The outlook for activity has not been helped by geopolitical tensions, from fighting in the Middle East to the strife between Russia and Ukraine.
Hockey said Australia, as the G20 host this year, had sought feedback from other G20 members on whether Russia should attend the meeting of leaders in Brisbane in November.
There had been calls from some quarters to block President Vladimir Putin from attending the summit given Russia's actions in Ukraine and the downing of airliner MH17.
The overwhelming consensus was that the door be left open to continue engagement with Russia, said Hockey.
Geopolitical tensions were also high on the agenda when financial policymakers of Japan, China and South Korea held their first trilateral meeting in more than two years in Cairns on Friday.
Another risk discussed was the Ebola epidemic as Sierra Leone began a three-day lockdown to try and stem the disease.
World Bank Group President Jim Yong Kim on Friday warned of the economic danger if fear of the disease caused consumers and travelers to change their behavior.
So serious was the situation, he said, that the United Nations was taking a leading role. Sources indicated the G20 communique on Sunday would include the need for international cooperation in fighting the outbreak.
“The (UN) Secretary General is handling Ebola as if it were sort of an outbreak of war, where instead of sending peacekeeping troops, we're going to send in people who are going to be battling Ebola,” Kim said.
Also on the drawing board at the G20 are plans to stem the loss of revenue from multinationals shifting their profits to low-tax countries, potentially reclaiming billions of dollars.
Taxation arrangements of global companies such as Google Inc, Apple Inc and Amazon.com Inc have become a hot political topic following media and parliamentary investigations into how many companies reduce their bills.
The OECD has unveiled a series of measures that, if implemented by members, could stop companies from employing many commonly used practices to shift profits into low-tax centers.
Since countries began targeting cross-border loopholes five years ago, an additional 37 billion euros ($47.5 billion) in tax had been recovered, OECD Secretary-General Angel Gurria said, adding that firms were estimated to be holding $2 trillion in low- or no-tax countries.
“The whole world needs to go after tax cheats,” Hockey said about the measures, which he hopes will be adopted by at least 44 countries.