G20 economic questions
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Under normal circumstances, the most important things to happen at a G20 meeting are cordial handshake photo ops. (Here’s our roundup of April’s meeting.) This G20 gathering, hosted by Russia in St. Petersburg, is already looking quite different. Here’s our guide to the major themes being discussed at the G20:
Reuters’ Timothy Heritage reports that the split between the US and Russia over Syria is likely to overshadow a meeting that was supposed to be focused squarely on jumpstarting the global economy. The Council on Foreign Relations’ Stewart Patrick says that as a result, this G20 will be the “summit of compartmentalizing… focus on economic recovery while ignoring the elephant in the room”. Sort of the international relations version of how you get along with your family.
The European Union seems to have already succeeded by that measure. Their official pre-summit communique doesn’t even include the word Syria and instead focuses on lofty, inactionable summitbabble about “making decisive progress on the way to sustainable and inclusive global growth”.
China has also warned of the economic risks associated with a US-led intervention in Syria — a $10-a-barrel rise in oil prices, Chinese Vice Finance Minister Zhu Guangyao says, could cut global growth by 0.25%.
The Federal Reserve:
Despite the ongoing Syrian crisis, one of the big themes of the meeting is the impact of the Fed’s plan to scale back its $85-billion-a-month buying of Treasuries and mortgage-backed securities. This “taper” has already been blamed for emerging markets stock declines and the melee in the Indian rupee. The MSCI Emerging Markets Index of global emerging market stocks has fallen more than 11% so far this year.
Today, Russia and China expressed concerns that the Fed’s actions could derail global growth. China’s deputy finance minister said the US should be “mindful of the spillover effects” of its actions.
Japan, which is in the midst of an aggressive fiscal and monetary stimulus (a/k/a Abenomics), will tell the summit that it is going ahead with a planned sales tax increase. Any pressure that increase puts on economic expansion, however, may be offset by additional government spending. Prime Minister Abe will tell the G20 that he is sticking to his strategy of making economic growth the cornerstone of his policy agenda. The Bank of Japan says recent data shows the country’s economy is “recovering moderately”.
Interestingly, for the first time in what seems like years, the euro zone isn’t being discussed much. Recently, there have been signs of a nascent European recovery in the form of increasing growth rates in Britain and Germany. According to the Guardian, UK Chancellor of the Exchequer George Osborne is preparing to report that the “recovering UK economy may move Britain from the slow lane of ailing European economies to being ranked alongside the US in terms of performance”. European Central Bank president Mario Draghi announced today that rates would be unchanged.
The FT’s Vanessa Houlder and Javier Blas report that G20 leaders want to take measures to reduce tax evasion. Specifically, the Dutch have said they will help “renegotiate loophole-ridden tax treaties with nearly two dozen developing countries”. The top tax official at the OECD said the G20 could take action that would be the precursor to automatic exchange of tax information between nations. Kofi Annan has a good guide to this long-debated topic — and how it could end up helping African economic growth. — Ben Walsh
On to today’s links: