As finance ministers and central bank chiefs from the Group of 20
developed and emerging gather ahead of a weekend meeting in Sydney,
many are already talking at cross purposes.
Emerging nations want the U.S. Federal Reserve to calibrate its
winding down of stimulus so as to mitigate the impact on their
economies. Developed members reply that the troubles in the emerging
world are mostly homegrown and domestic interest rates have to be
set with domestic recoveries in mind.
"Emerging markets need to take steps of their own to get their
fiscal house in order and put structural reforms in place," U.S.
Treasury Secretary Jack Lew said at a financial conference in Sydney
ahead of the ministerial meetings.
That was a sentiment very much echoed by the finance ministers of
Japan and Britain.
Japan's Taro Aso said the Fed's taper was positive as it reflected
an improving U.S. economy, even if it raised the risk of sharp
capital outflows from some others.
"It is important for emerging economies to correct these things by
making their own efforts," Aso said in Tokyo.
Developing nations from South Africa to Turkey to Russia have seen
their currencies crumble in recent months as the prospect of higher
returns in the United States sucked foreign funds from their
Yet Lew also had pointed advice for other major nations, calling on
China, Japan and Europe to make domestic demand the engine room of
"I think it's a cross-cutting theme to what we see as the challenge
for the global economy," said Lew. "The U.S. recovery is healthy and
moving very much in the right direction and picking up velocity, but
it can't make up for a lack of demand and growth in the other key
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HARD TARGET, HARD TO DO
Australian Treasurer Joe Hockey is trying to bring some much-needed
focus to the G20, proposing members sign on to ambitious growth
agendas, and hold each other to account for delivering them.
And he's having some early success. Setting such a growth target was
"a good idea", IMF Managing Director Christine Lagarde said on
Thursday. "There is a potential for doing better and more, if only
countries take some action."
He won further support on Friday from Britain's finance minister,
George Osborne. "If we could adopt a target, or an aspiration, that
would be a good thing," Osborne said in Sydney. "I'm with Joe on
The need for some sort of fresh stimulus was highlighted by a grim
report from The Organisation for Economic Co-operation and
Development released on Friday.
It warned that sweeping reforms were urgently needed to boost
productivity and lower barriers to trade if the world was to avoid a
new era of slow growth and stubbornly high unemployment.
Yet the idea of setting concrete goals for the G20 has caused
nothing but friction in the past, with proposals to target fiscal
and current account deficits coming to nothing in the end.
The proposal has already drawn skepticism, with a German government
source criticizing the idea as a "slightly antiquated form for
(Reporting by Wayne Cole; editing by
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