Korea sees progress on safety nets with G-20
Finance ministers and central bank heads of the G-20 countries take a break before the opening of an afternoon session on financial regulation reform at the Westin Chosun Hotel in Busan, Saturday. The three-day G-20 meeting, held in the southern port city, ended Saturday. By Song Bong-geun
BUSAN - A meeting of finance ministers and central bankers from G-20 states pledged to work harder to put their fiscal house in order, accelerate financial regulatory reforms and pay more attention to bridging the developmental gap between rich and poor countries.
But the gathering of financial leaders from 20 of the world’s leading and emerging economies failed to narrow differences on whether to impose a global bank levy to prevent risky financial transactions and build up funds for future bailouts.
The issue is likely to be discussed at the G-20 Summit in Seoul in November, said Yoon Jeung-hyun, the Korean finance minister.
“We encouraged progress on financial safety nets and acknowledged the need for national, regional and multilateral efforts to deal with capital volatility and crisis contagion,” said the G-20 communique following the meeting that ended Saturday in Busan.
The group agreed “to explore policy options to improve global financial safety nets, based on sound incentives.”
Concerns over financial instability, triggered by the euro-zone sovereign debt crisis, took center stage during the debates among the policy makers. The conversations at the meeting were meant to prepare the agenda for the upcoming G-20 summits in Toronto in late June and Seoul.
Finance Minister Yoon said the euro-zone fiscal crisis may prompt some countries to delay executing exit strategies from loose monetary policies introduced in 2008.
U.S. Treasury Secretary Timothy Geithner urged countries with foreign exchange surpluses to promote more consumer spending at home to help pull the global economy out of recession since demand from the United States, the world’s largest consumer market, is waning.
“Those countries with serious fiscal challenges need to accelerate the pace of consolidation. We welcome the recent announcements by some countries to reduce their deficits in 2010 and strengthen their fiscal frameworks and institutions,” said the communique.
The meeting, however, failed to resolve a debate over whether a bank levy should be imposed. The U.S. and the U.K. support the idea, while Canada, Australia and several big emerging economies oppose it. Little progress appeared to have been made since the idea was discussed at April’s G-20 ministerial in Washington.
“We have a hope that there will be a concrete proposal at the G-20 Summit in November,” said Yoon.
The issue of bridging the developmental gap received more prominent mention in the latest communique compared to one issued at the April G-20 meeting.
The change came after Seoul pushed for it to be included higher up on the agenda in an effort to make the G-20 more relevant in less developed nations.
“In addition, structural reforms, development policies, particularly supporting the poorest countries, and ongoing efforts to refrain from raising trade and investment barriers and resist protectionist measures are required,” said the communique.
Seoul officials organized a separate forum at Busan for policy makers and developmental experts to give proposals to the G-20 on closing the developmental gap and help extend financial services to 2.7 billion people in the developing
world that now lack them.
The U.S. treasury secretary made a plea for greater domestic consumption by countries, mainly in Asia and the Middle East, that enjoy healthy financial surpluses.
“Achieving a strong and sustainable global recovery requires that we make further progress on rebalancing global demand,” Geithner said in a letter sent to his G-20 counterparts before the meeting.
“Given the broader shifts underway in the U.S. economy toward higher domestic savings, without further progress on rebalancing global demand, global growth rates will fall short of potential. The necessary shift toward higher savings in the United States needs to be complemented by stronger domestic demand growth in Japan and in the European surplus countries, and sustained growth in private demand, together with a more flexible exchange rate policy, in China.”
By Jung Ha-won [hawon@joongang.co.kr]
with the Korea JoongAng Daily
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