'I Take Responsibility' Obama's G-20 Confession
Part 4: 'A Very, Very Good Compromise'
Whether or not the final communiqué is, in the end, an effective document -- one that will help get the financial world back on its feet again -- will depend on each and every one of the G-20 countries and the extent to which they feel committed to implementing the goals agreed on. It is possible that the London summit will be a turning point, but it is by no means certain this will be the case.
But the mere fact that the G-20 leaders were able to arrive at an agreement on the contents of a joint communiqué after weeks of wrangling over principles can certainly be viewed as a success.
In the end, Germany and France gained points. To the disgruntlement of the British, the summit communiqué doesn't call for further stimulus programs, rather only for billions in funds for the IMF, most of which had already been decided on anyway.
The German contribution won't come out of the federal budget but rather from the vaults of its central bank, the Bundesbank. This fact is doubly pleasing to the German finance minister, given that he will have to provide only part of the money with which the IMF will, among other things, be financing orders for the German export sector.
While the promise to put new spending programs in place was expressed rather vaguely, statements regarding financial market controls were more concrete than expected. The G-20 not only approved a comprehensive list of new rules for banks, ratings agencies, and hedge funds -- they also agreed to create a new international supervisory authority, the Financial Stability Board (FSB), as well as to accept Sarkozy's list. From now on, that list will include the names of tax havens that are unwilling to cooperate with other countries in efforts to identify tax evaders.
While this is all a step in the right direction, it is far from constituting a final victory over speculation and tax evasion. It will take years before the declarations of intent made in London are implemented in national legislation and it is unlikely the spirit of unity that informed the summit can be sustained over a longer period of time.
And even if these doubts should prove to be unjustified, the London G-20 summit will not really defuse the global economic crisis. The biggest dangers to the global economy weren't even addressed by the summit. The G-20 leaders paid no attention at all to the fact that bank balance sheets throughout the world continue to be burdened by toxic assets -- i.e., mortgage-based securities, now worthless, constituting total risks in the trillions of dollars, and to the problem constituted by deadlocked trade talks.
Since 2001 the international community has been engaged in trade talks known as the Doha development round, aimed at lowering tariffs and farm subsidies in Europe and the United States as well as protecting patents and brand names in Asia. If the countries involved could come to an agreement this would lead to a tremendous spike in international trade that would have the effect of a stimulus package in the current crisis situation.
The London summit failed to agree on a date for concluding the Doha round. The call by experts for the WTO in Geneva to be given a stronger say in these matters wasn't even put on the agenda for consideration.
Worse than that, the G-20 remained silent on growing imbalances in the global economy. Prior to the crisis consumers and companies in the United States accumulated debts on a gigantic scale. At the same time, countries like Germany, China, and Japan showed considerable export surpluses. These imbalances are seen as being contributing causes of the current financial and economic crisis.
But instead of working to reduce existing imbalances, the countries in question seem to be intent on aggravating them further. The United States has created stimulus programs involving hundreds of billions of dollars that will expand an already huge public debt. Germany and China are providing support to their export industries with a view to continuing to achieve export surpluses. If a common strategy is not found soon that can overcome conflicting interests, the result could be new trade wars and currency instabilities.
As such, people in Asia, America, and Europe have been left with mixed feelings about the outcome of the London summit. The G-20 leaders managed to avoid an open conflict, but their agreement basically served to deepen existing economic differences. Those of us who witnessed how passionately they squabbled over matters of secondary and tertiary importance have every reason to be skeptical that this situation is going to change any time soon.
It will take a number of further summits and policy shifts on the part of national governments before the G-20 will have earned the right to refer to itself as a global government that is looking to promote the good of the world as a whole. The world we saw in London was a world in transition. It was no longer the old world of nation states, but it was also not yet a new world capable of thinking in harmony.
When the G-20 leaders presented the results of the summit at their national press conferences on Thursday afternoon, they had Barack Obama's warning words -- not to sell the results of the summit short, not to show journalists the discord they want to see, and to display confidence -- echoing in their ears.
Angela Merkel did her best to comply. The chancellor told German journalists that a "very, very good compromise" had been reached, an "almost historic compromise." She tried to display confidence like Obama said. But she was doubtless mindful of the fact that a whole slew of historic compromises may be needed to deal with the current crisis.
Translated from the German by Paul Cohen and Larry Fisher.