Rules, reforms, development

The EU has agreed on a draft common strategy with shared targets in view of the upcoming meeting in Cannes next November 3-4. Or at least, these are the declared intentions. The fact that the G20 presidency-in-office is in the hands of a EU country (France) is a further responsibility for Europe. The point was reaffirmed by the President of the EU Council, Herman Van Rompuy, and of the EU Commission, José Manuel Barroso, in the joint letter of October 30 addressed to all the leaders of major world economies. The letter reiterates also the conclusions of the European summits of October 23 and October 26.Joint responsibility. In the statement, Van Rompuy and Barroso point out that before the major challenges brought about by the ongoing economic crisis, market instability and other problems with a global bearing (energy, climate change), it is time to adopt coordinated action, especially since the destinies of world powers and those of all of humanity are interdependent like never before. Summarising the main decisions taken in the premises of the Council and the Eurogroup, the two EU institutions’ leaders added: “We will implement these measures rigorously and in a timely manner” for a “swift resolution of the crisis”. However, “whilst we in Europe will play our part, this cannot alone ensure global recovery and rebalanced growth”. Therefore “there is a continued need for joint action by all G20 partners in a spirit of common responsibility and common purpose”. In fact, it is necessary “to help restore global confidence, support sustainable growth and job creation”, and maintain financial stability. Indeed, European countries have to solve the knot of sovereign debt, notably, the cases of Italy and Spain, debated a few days before the G20. If not, global economies will be seriously affected. But some jointly agreed responses are taking shape. Sustainable solutions for Greece (just like mobilization had previously included Ireland and Portugal), significant further strengthening of the resources of the European Financial Stability Facility (EFSF), incisive rules for governance, addressing the tensions in financial markets and recapitalising banks (declared intentions, most of which still need to be enforced).Priorities for the summit. Belgian Van Rompuy and Portuguese leader Barroso outline a set of priorities for the G20 summit: tackling global macroeconomic imbalances, (also by boosting trade), implementing the financial market reform agenda, stepping up the social dimension of globalization, ensuring Food Security, tackling the global climate and energy challenge (on the agenda of the UN Conference in Durban, scheduled to take place in less than a month), addressing the energy challenge and the fight on corruption. In fact, almost nothing new compared to what the 27 leaders declared in the “Conclusions” of the European Council of October 23. “Determined action is necessary to maintain financial stability, to restore confidence and support growth and job creation”, states the document. The G20 is expected to adopt “an ambitious Action Plan” with the implementation of specific measures by all twenty countries” to address the short-term vulnerabilities the global economy is facing.Reinforcing surveillance. In particular, the European Council identified the following areas of intervention: “Reforming the international monetary system (IMS)”, by reinforcing surveillance and crisis management tools and better coordinating economic and monetary policies”. “Sound macroeconomic policies should be the first line in responding to capital flow shocks and the G20 should continue to promote open capital markets and avoid financial protectionism”. The G20 “should ensure that the IMF has adequate resources to fulfil its systemic responsibilities and should explore possible contributions to the IMF from countries with a large external surplus”. Secondly, “strengthening the regulation and supervision of the financial sector”, with the implementation of Basel II, II-5 and III, the reform of OTC derivatives, (Over The Counter treaties, outside regulated markets) and introducing a financial transaction tax, so-called Tobin tax. Third: “tackling the excessive volatility of commodity prices” and promoting global recovery and sustainable and inclusive growth”, by supporting an active WTO negotiating agenda, “including for the least developed countries”. Fourth: “advancing international trade liberalisation and resisting protectionism”. Last, but not least, combating climate change, in particular by mobilising sources for climate change finance and with the support of political initiatives.