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 As finance ministers and central bank chiefs from the Group of 20
developed and emerging countries 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 and financial markets. 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.
A draft of the communique, reported by Bloomberg News, highlighted
how the push for growth had trumped concerns about volatility in
emerging markets that had threatened to overshadow the meeting.
"We commit to developing new measures to significantly raise global
growth, while maintaining fiscal sustainability," Bloomberg quoted
the draft as saying.
"We recognize accommodative monetary policy settings in advanced
economies will need to normalize in due course, in line with
stronger growth."
Developed market policymakers see little risk of the recent market
turmoil spiraling into the kind of contagion which prompted
concerted and coordinated action from the G20 following the global
financial crisis.
"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, Britain and Germany.
German's Wolfgang Schaeuble told CNBC that emerging countries first
had to do their homework, before demanding solidarity from the rest
of the G20.
Japan's Taro Aso said the Fed's tapering of its stimulus program was
positive as it reflected an improving U.S. economy, even if it
raised the risk of sharp capital outflows from other countries.
"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
economies.
South Korea Deputy Prime Minister, Minister of Strategy and Finance
Hyun Oh Seok suggested the Fed and other major central banks could
at least strive to avoid surprises in their policy.
"QE tapering should be undertaken in a very orderly manner and
carefully calibrated given the global economy today is very much
interconnected," Hyun told Reuters, referring to quantitative
easing, usually in the form of central bank purchases of bonds or
other assets.
HARD TARGET GAINS SUPPORT
The head of the U.S. Treasury also had pointed advice for other
major nations, calling on China, Japan and Europe to make domestic
demand the engine room of growth.
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"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 economies."
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 this."
The need for some sort of fresh stimulus was highlighted by a grim
report from The Organization 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 to avoid a new era of slow
growth and stubbornly high unemployment.
"Our message to G20 finance ministers today will be unambiguous: go
structural. Go structural to achieve a strong and sustainable
balance inclusive growth," OECD Secretary-General Angel Gurria told
reporters.
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
economic planning".
Yet late on Friday, a G20 source said there was a growing chance the
final communique from this weekend's meeting would indeed include a
single goal for growth.
"It's quite likely there will be a target for global growth. None
for each country," the source said.
(Additional reporting by Ian Chua, Cecile Lefort, Jane Wardell,
Leika Kihara, Lincoln Feast; editing by John Mair & Kim Coghill)
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