LEADERS OF the G20 economies are preparing to endorse a communique pledging further action on growth, increased resources for the International Monetary Fund and fresh commitments by the European Union to do more to integrate to solve its problems.
The G20 leaders representing 80 per cent of the world economy are meeting in the luxury resort of Los Cabos, Mexico, against a backdrop of incessant economic storms, mainly coming from the euro zone.
Plans for an after-dinner meeting between US president Barack Obama and the leading four euro zone countries attending the G20 were scrapped officially because the issue of the euro zone had been discussed enough.
There may also have been fears that tensions were starting to escalate between euro zone leaders, notably the two EU figureheads, José Manuel Barroso and Herman Van Rompuy, and other G20 countries about the slowness with which the EU was addressing its problems. In a sign of the tensions, Italian prime minister Mario Monti said no one thought the EU was “the only source of the problem”. The crisis “had its origins in imbalances in other countries, including the US”, he said.
Among the commitments in a draft G20 communique, which emerged yesterday, was a pledge to consider concrete steps towards a “more integrated financial architecture” in Europe that would include common banking supervision and firm guarantees to repay bank depositors.
The communique states that euro-area members of the G20 “will take all necessary policy measures to safeguard the integrity and stability of the area, improve financial markets and break the feedback loop between sovereigns and banks”.
The US, the IMF and European Commission have been urging EU member states to press ahead with a banking union. The term banking union does not appear in the text, but the wording suggests Germany may be willing to shift a little in talks between EU leaders in Rome on Friday and at a full gathering of EU heads of state in Brussels next week.
In the most substantive development, the emerging countries agreed to increase funding for the IMF in return for changes in the composition in the IMF board.
China, Brazil, Mexico, India and Russia all announced contributions to the IMF to bolster a “second line of defence”. – (Guardian service)
