Screenshot from www.g20.org
The need and the scope of belt — tightening in crisis stricken countries is due to be one of the central topics during the G20 summit in Moscow, as economic growth around the world is getting increasingly stifled by austerity measures.
It is becoming increasingly evident that austerity brings almost no fruit. A two — day G20 meeting in the Russian capital is going to examine the problem.
“We’ll propose to change the Toronto agreements, possibly by changing its parameters. They are not met at the moment, and they should be changed,” the Wall Street Journal (WSJ) quotes Anton Siluanov, Russia’s Finance Minister.
In 2012 G20 leaders agreed in Toronto to cut their budget deficits 50% by 2013, as well as at least stabilize their government debts by 2016.
Economists calculated then that a €1 cut in the budget would cost about 50 European cents in lost growth, the real figure looks more like €1.50 for each €1 cut, according to the IMF and the G20’s economic advisers.
The most recent economic data shows recovery has so far been anaemic, with Thursday’s figures showing the steepest year on year contraction in the eurozone since 1Q 2009. Even the area’s economic powerhouses — Germany and France — slid into the red in the last quarter of 2012, compared to the previous 3-month period. The latest report on the US economy was also an icy shower, as the country’s GDP showed a 0.1% contraction in 4Q 2012, while everybody expected it to grow 1.1% during the quarter.
“A third of the G20 is in recession. We need to do more to get people back to work and Toronto 2.0 is not the right answer,” U.S. Treasury Under-Secretary Lael Brainard told a briefing earlier this week. “We must avoid jeopardizing the recovery with a premature shift to restraint.”
Though not on the official agenda, the need to avoid currency manipulations, or so-called currency wars, would be one of the central topics at a Moscow G20 meeting. Member states are under pressure from host Russia to use “stronger and more specific language” on the issue, as the WSJ refers to a senior G20 official. This week the G7 reaffirmed that they won’t target exchange rates warmed up talks around the issue.
Among other issues to be discussed in the framework of G20 is stress testing for Russia’s financial institutions, as well as the ways to regulate rating agencies operations.
