Initiating global reforms

Finance ministers and central bank governors from the Group of 20 major industrialized and emerging economies wrapped up their two-day conference in the southern port of Busan over the weekend. The meeting aimed to set the tone and smooth the grounds for the summit meeting slated for Seoul in November. As this year’s chair country for the G-20 Summit, Korea successfully orchestrated the setting of the agenda for the upcoming summit. Fortunately, the “dress rehearsal” went well.

The G-20 finance ministers and central bankers agreed to veer away from fiscal stimulus measures to help accelerate economic recovery in the aftermath of a financial meltdown and instead decided to focus on scaling down spending and restructuring fiscal deficits.

The same countries that had not long ago reaffirmed fiscal support to sustain a global economic recovery instead succumbed to financial market concerns and warnings for the consequences of heavy sovereign debt and poor public finances to turn attention in mending fiscal frameworks.

The sovereign debt crisis that started with Greece has blown the direction of world economic policy towards strengthening fiscal health rather than economic growth. The leaders decided to leave the method and scale of fixing public finances to individual states to customize their scale-back program according to their respective economic situation.

Each country cannot use the same impetus and methods to enforce austerity measures as economic conditions and capacities vary. To muster support from all nations, moderate wording may have been unavoidable. However, the G-20’s choice is too ambiguous to have any real effect in motivating governments to tend to their deficit problems, let alone appease market concerns.

Future meetings must come up with more effective and specific guidelines to help improve the fiscal structure of each economy in order to make the G-20 platform meaningful and productive. The shelving of the controversial bank tax is a problem that eventually must be addressed.

Korea has helped generate an agreement among G-20 countries to ramp up efforts in creating a global financial safety net to prevent a regional crisis from spreading to other markets. We should raise our voice in the matter to advocate for other emerging markets that are susceptible to the financial problems of bigger and more developed markets.

We must also capitalize on the experience from the Busan meeting to prepare impeccably for the G-20 Summit and stand in the forefront of initiating global financial reforms.