G-20 leaders agree on remedies for global economy
ST. PETERSBURG, Russia — After two days of summit meetings here, President Obama and other world leaders signed a lengthy declaration of prescriptions for the global economy, including pledges that placed a renewed emphasis on creating jobs as opposed to curbing deficits.
The so-called Group of 20 major economies also took further steps to crack down on multinational companies that avoid paying taxes.
The 27-page joint statement from the G-20, which concluded its meetings Friday, underscored the shifting momentum in growth toward the U.S. and other advanced economies.
The document also reflected the changing thrust of the G-20’s focus from crisis mode to one preparing for longer-range concerns, now that the Eurozone financial problems that had dominated recent summits have eased.
High on this year’s agenda was the nascent slowdown in developing countries and the recent financial markets jolt that some of them have felt, precipitated by investors’ expectations of reduced stimulus by the U.S. Federal Reserve.
The G-20 said policy decisions by central banks should be “carefully calibrated and clearly communicated,” but the statement didn’t go nearly as far as India and some of the developing nations wanted. It did not even acknowledge that policies of central banks in advanced countries were having negative side effects on developing economies.
Moreover, the declaration largely pointed the blame for the currency volatility in some of the countries on structural weaknesses in their economies and financial systems.
“Some emerging markets were lax in putting in place reforms,” a senior U.S. Treasury official said. The official, who was not authorized to speak publicly, said that the capital flight from emerging markets reflects the improved growth prospects in the U.S.
“Countries need to adjust for that reality,” the official said.
The G-20 summit, held on the shores of the Baltic Sea, was extraordinary in that leaders were preoccupied by the civil war in Syria and sharp differences over Obama’s push for a military strike on the Syrian regime for its alleged use of chemical weapons against civilians and children.
In a news conference after the summit ended, Obama spoke almost entirely about Syria. Other G-20 heads were similarly peppered with questions about their positions on a possible U.S.-led military action in Syria, strongly opposed by Russian President Vladimir Putin.
The G-20 heads apparently had a far easier time coming to agreement on how to respond to the global economy, which faces a new challenge in the slowdown of developing countries, as well as persistent high unemployment in many advanced countries, including the U.S.
“There was as much agreement on economic and financial issues as there was disagreement on Syria,” said Enrico Letta, Italy’s prime minister.
Even so, analysts following the summit said that despite its breadth, the communique lacked specifics and concrete action plans.
“There’s little or no immediate, meaningful deliverables,” said Domenico Lombardi, a G-20 expert at the Center for International Governance Innovation in Canada, who was in St. Petersburg.
“Right now there’s a deficit of demand” for goods and services globally, Lombardi said, noting that the U.S. was still enacting government spending cuts, while the Eurozone was expected to grow very slowly and the developing world was starting to weaken.
“It’s not clear where the demand will come from,” he said.
Experts saw as one of the bright spots in this year’s summit the progress made in the G-20’s efforts to combat tax evasion and avoidance by multinational companies — a priority for the Obama administration.
In Europe, too, low tax payments by major global companies such as Google Inc. and Amazon.com Inc. have sparked public anger as countries struggle out of recession.
Leaders agreed to exchange tax data by the end of 2015 and to take other steps to coordinate policies to stop multinational companies from shifting profits to avoid taxes.
“This is important for jobs for Americans,” the senior U.S. official said.
French President Francois Hollande called the deal “perhaps the most important” agreement reached at this year’s G-20 summit.
Angel Gurria, head of the Organization for Economic Cooperation and Development, said it’s crucial that Internet giants like Google and Facebook Inc. are covered by the new rules.
“You’ve got to get the big guys to make a contribution,” Gurria said. Otherwise, he said, “What are the treasurers, the ministers of finance left with? Medium and small-scale enterprises, the middle class to tax?”
The declaration also reiterated the G-20’s long-standing goal of achieving a better balance among those countries running big deficits, particularly the U.S., and those with large surpluses in their trade and current accounts.
In recent years, the finger pointed to China. But China’s current-account surplus, as a share of its economy, has fallen sharply since the recession, to about 3% from 10%, while Germany’s surplus has continued to grow, to about double China’s current ratio.
Analysts said Germany appears to have taken some cover in that its trade activity is sometimes lumped in with the 16 other members of the euro area, so the picture doesn’t look as bad because other euro countries are running large deficits.
It appeared that neither the U.S. nor the Europeans brought this imbalance to the G-20 discussions, though officials agreed that this was a concern and that they were moving to address it.
“Those countries which have the surpluses — we’ve got this debate,” said Pierre Moscovici, France’s finance minister.
The Associated Press was used in compiling this report.
