World Affairs

G20 Summit: Europe and US compromise

The London G20 Summit held last week was expected to bring about serious repercussions not only to the global economy but the existing geopolitics as well. The surviving fossils of communism in Sri Lanka hoped that it would produce the epitaph of world capitalism while others who do not wish to see America continuing as the sole superpower hoped that the summit will spell the doom of American capitalism.

The two day summit also did not live up to expectations for President Obama. The two day visit to London, of the first Afro-American couple from the White House, had the trappings of receptions to rock stars though amidst massive protest demonstrations against the summit.

In the deliberations of the summit, however, Barack Obama who had proved to be much popular among European leaders during his visit as presidential candidate was not as successful in his main objective, making G20 members commit themselves to massive economic stimulus packages to rescue the beleaguered economies and the world economy as well.

Europe differs

President Obama and British Prime Minister Gordon Brown have been pushing hard for European nations to commit themselves to massive stimulus packages in the hope of making European economies that had been hit by recession recover but Europeans have been quite reluctant. Analysts say that they feared such spending which would have involved reduction of bank interest rates that would have resulted in strong inflation while the other reason being that they could not afford such expenditure — particularly the poorer East European nations.

Frances’s Nicholas Sarkozy facing an economic downturn as well as a down turn in his popularity at home, too took strong exception to the American proposals and it was even rumoured that he would walk off the conference if it did not come to grips with the substantial issues concerning international recession and attempted to paper over cracks.

Sarkozy was backed by German Chancellor Angela Merkel. Both had wanted an internal financial regulator to control the economies of member countries but the summit decided to enact a ‘globally consistent, supervisory regulatory’ frame work instead. The Summit instead had decided on a new Financial Stability Board with a strengthened mandate and a Financial Stability Forum.

Trillion dollars for recession

The G20 leaders agreed to a trillion dollar deal to combat the worst recession the world has known since the 1930s and also to tighten financial regulations, bring in tax havens, hedge funds and credit ratings under closer supervision. To what extent these measures would help the world financial systems to recover is not known. ‘Whether they are sufficient we shall wait and see,’ Obama had said in his closing address.

But being a politician he has to keep his home fires burning. He had called the outcome of the meeting a ‘great victory,’ ‘historic’ and result in a concrete effect in each nation by creating jobs, ‘saving jobs,’ ‘expanding economies’ loosening credit and restoring confidence in financial markets.

‘The steps taken were critical to prevent sliding back into depression, they were bolder and more rapid than any international response to financial crises in living memory,’ the American President had noted.

Critics have said that while Obama’s popularity ratings are still high in America — probably higher in Europe — it will not last if he cannot cope with the recession and he would be in deep trouble soon.

Obama had been candid enough to admit that what had been decided at the Summit ‘is not a panacea but it was a turning point in the pursuit of a global economic recovery.’ ‘Whether these steps are sufficient we shall wait and see,’ he had added.

America still leads

To those cynics who are beginning to doubt America’s continued leadership of the world Obama had the following message: ‘I don’t buy the notion that America can’t lead the world. America is a critical actor and a leader on the world stage that we should not be embarrassed about. We exercise leadership best when we are listening,’ he had noted.

The G 20 Summit had not lived up to the expectations of some that it would spell doom to the existing world financial system or the leadership of America but what had been achieved it appears are steps agreed upon to reform the world financial system and exert close supervision on errant banks and other financial institutions.

However, it has to be noted that what has been said at summits and accepted with acclaim often does not see the light of day. The G-20 Summit held last year as a prelude to the London Summit condemned trade protectionism with much severity but it was noted at this summit that 18 of the 20 countries had stepped up protectionist measures since then.