G20 nations pledge to bolster defenses
against Brexit headwinds
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[July 23, 2016]
By Jan Strupczewski and Gernot Heller
CHENGDU, China (Reuters) - The world's
leading economies will do more to lift global growth and share the
benefits more broadly, top policymakers said on Saturday as they sought
to deal with fallout from Britain's Brexit vote and counter
dissatisfaction with globalization.
Finance ministers and central bankers from the Group of 20 nation are
huddling in China's southwestern city of Chengdu this weekend to discuss
how to confront global challenges exacerbated by Britain's decision to
leave the European Union.
The specter of protectionism, highlighted by U.S. Republican
presidential candidate Donald Trump's "America First" rhetoric and talk
of pulling out of trade agreements, also hangs over the meeting.
"The recovery continues but remains weaker than desirable. Meanwhile,
the benefits of growth need to be shared more broadly within countries
to promote inclusiveness," the G20 ministers said in a draft communique
seen by Reuters on Saturday.
The draft, which is subject to change before it is expected to be issued
at the end of the meeting on Sunday afternoon, said Brexit added to
uncertainty in the global economy but G20 members were "well positioned
to proactively address the potential economic and financial
U.S. Treasury Secretary Jack Lew said it was important for G20 countries
to boost shared growth using all policy tools, including monetary and
fiscal policies as well as structural reforms, to boost efficiency.
"This is a time when it is important for all of us to redouble our
efforts to use all of the policy tools that we have to boost shared
growth," Lew told reporters.
Chinese Finance Minister Lou Jiwei called for more coordination to
promote sustainable growth, as fiscal and monetary tools were becoming
"G20 countries should increase policy communication and coordination,
form policy consensus and guide market expectations, making monetary
policy more forward-looking and transparent and increase the
effectiveness of fiscal policy," Lou said.
The G20 meeting was the first of its kind since the Brexit vote and a
debut for Britain's new finance minister, Philip Hammond, who faced
questions about how quickly the UK planned to move ahead with formal
negotiations to leave the EU. Many countries are worried that a long
delay could add to uncertainties that are dragging on the world economy.
The International Monetary Fund this week cut its global growth
forecasts because of the Brexit vote.
Data on Friday seemed to bear out fears, with a British business
activity index posting its biggest drop in its 20-year history.
"I hope that there is going to be clarification about the timing and
process of the divorce. The sooner the better so this generates a new
equilibrium," Italian Economy Minister Pier Carlo Padoan told Reuters.
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Lou Jiwei, China's Minister of Finance speaks at the High-level Tax
Symposium held in Chengdu in Southwestern China's Sichuan province,
Saturday, July 23, 2016. REUTERS/Ng Han Guan
French Finance Minister Michel Sapin said even though Britain was
not prepared for Brexit, its response time should not be indefinite.
And German Finance Minister Wolfgang Schaeuble said it should not
fall to other countries to spend more to try to cushion the blow of
"I believe that is a matter that the Britons need to deal with
themselves," he said following talks with Hammond.
Lew, in a meeting with Japanese Finance Minister Taro Aso,
reiterated the need for G20 members to refrain from competitive
devaluations, as had been agreed at a G20 meeting in February.
Regarded as a safe haven at times of market turmoil, the yen <JPY=>
strengthened to around 100 to the dollar after the Brexit vote in
late June, much to the chagrin of Japanese officials, although it
has since eased back to around 106 per dollar.
Markets are speculating about a further expansion of the Bank of
Japan's massive stimulus program at a July 28-29 policy review, with
the yen's strength this year hitting exports and undermining efforts
to escape deflation.
Bank of Japan Governor Haruhiko Kuroda said he would ease policy
further if necessary to achieve its 2 percent inflation goal, but
again shrugged off talk of the BOJ taking the radical policy step of
"If it means that central banks are directly underwriting government
bonds, or managing monetary and fiscal policies as one, that would
be prohibited in Japan as well as other advanced economies, as
lessons from history tell us," he said.
(Reporting by Elias Glenn, Tetsushi Kajimoto, David Lawder, William
Schomberg and Kevin Yao; Writing by John Ruwitch and Pete Sweeney;
Editing by Jacqueline Wong)
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