G20 finance ministers gather as time runs out

Friday, October 14, 2011
By Paul Martin

Top of France’s agenda when it took the presidency of the G20 last November was the arcane subject, “reducing imbalances”. Judged against its own goals one year on, then, it is fair to say the French presidency has not been an unequivocal success.

By Philip Aldrick

Global imbalances are as entrenched as they ever were. Budget deficits dominate the political agenda, with countries from the US to Italy to Greece still grappling unsuccessfully with their debts. Trade imbalances continue to warp economies, as consumer-heavy nations try to kick-start their manufacturing engines and exporters try to trigger a consumer boom.

The China-US trade deficit is a case in point. It hit a record $29bn in August. The US is now lurching towards protectionism, the desperate result of failed negotiations. The US Senate has approved legislation to impose penalty tariffs on Chinese products sold in the US if China does not do more to let its currency appreciate.
It’s not like France didn’t see the risks ahead. In February, Christine Lagarde, the International Monetary Fund’s managing director who was then French finance minister, warned that a failure to address the imbalances “leads us straight into the wall of another debt crisis”. How prescient.

At the same time, with the world appearing to have turned the corner, President Nicolas Sarkozy warned against complacency. Complacency, he said, “would be the death of the G20”.

As the G20 finance ministers and central bankers gather in Paris this Friday and Saturday, a collective sense of failure will loom large. But France still has time to rescue its G20 presidency. If a deal can be struck to restore confidence in the euro area and settle the baying markets, France will have done the global economy a great service. Work has already begun in earnest, and must continue this weekend.

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