G-20 Cannes summit 2011

December 29, 2011

G-20 is a group of finance ministers and central bank governors from 20 economies which include 19 countries viz. South Africa, Canada, Mexico, United States, Argentina, Brazil, China, Japan, South Korea, India, Indonesia, Saudi Arabia, Russia, Turkey, France, Germany, Italy, United Kingdom, Australia plus the European Union.

The EU is represented by the President of the European Council and by the European Central Bank.

Some Important Facts:

It was proposed by Canadian Finance Minister Paul Martin.
The basic objective was cooperation and consultation on matters pertaining to the international financial system.
In 2008 Washington summit it was announced that from September 2009, the group will replace the G8 as the main economic council of wealthy nations.
G-20 summits are held semi-annually since 2008.
G-20 countries are account for about 85 percent of global output.

About different “G” terms:

G-6:G-6 refers to a group of 6 industrialized nation’s viz. France, Germany, Italy, Japan, United Kingdom, and United States. It was converted in G-7 in 1976 when Canada Joined it. So G-6 does not exist today.
G-7: G-7 refers to group of seven industrialized nations, when Canada joined the G-6 in 1976 and its members are France, Germany, Italy, Japan, United Kingdom, United States and Canada. It exists and its latest summit was held at Canada in February 2010.
G-6 (EU): G-6 EU is an unofficial group of the home ministers of the 6 members of EU viz. Germany, France, United Kingdom, Italy, Spain, and Poland. These countries are having largest population in EU and the G-6 (EU) group was formed to deal primarily with the problem of immigration, terrorism and law and order.
G-8: In 1997, when Russia joined the G-7, it became G-8. Please note that in G-8, European Union is represented, but cannot host or chair. It was decided in the G-20 Washington summit 2008 that G-8 will be replaced by G-20 in the September 2009 Pittsburgh Summit. So now G-8 is superseded by G-20.
G-33: G-33 was formed in 1999 and existed for a brief period. It’s members were thirty-three leading national economies of the world. It was superseded by G-20.
G-20: G-20 was formally established on 26 September 1999 and its first summit took place on 15–16 December 1999 in Berlin, most recent was held in Seoul on November 11–12, 2010
G20 developing nations: “G20 developing nations” was formed after the Brasilia Declaration which gave rise to BRIC Nations in 2003. It’s a trade block of 23 developing economies as of now.

G-20 Summits:

First G-20 summit was held in Washington DC on November 14–15, 2008 and it was hosted by George W. Bush, then US president.
Second G-20 Summit was held in London in April 2009, and was hosted by Gordon Brown, then PM of UK.
Third G-20 Summit was held at Pittsburgh in United states in September 2009 and was headed by Barak Obama, US President.
Fourth G-20 Summit was held at Toronto in June 2010 and was hosted by Stephen Harper, Current Prime Minister of Canada.
Fifth G-20 summit was held recently at Seoul on November 11 and 12 and was hosted by Lee Myung-bak, Current President of South Korea.
Sixth G-20 summit was recently held at Cannes, in France.

Most Important Outcomes of Previous the G-20 Summits:

First G-20 summit, Washington, November 2008:

The G-20 came to the forefront and it was hailed for the first time as Bretton Woods II.
The outcome was a Washington declaration which reached a common understanding of the root causes of the global crisis.
India welcomed this meeting as first time there was a genuine dialogue between many of the developed countries and the emerging economies.

Second G-20 Summit: G-20 London Summit, April 2009:

It is called “London Summit”
Its agenda was reforms in the International Monetary Fund (IMF), the Financial Stability Forum (FSF) and the World Bank.
The countries reached at an conclusion of providing US$1.1 trillion stimulus to various programs designed to improve international finance, credit, trade, and overall economic stability and recovery. Which included:
- US$500 billion increase in the resources pledged by members to the New Arrangements to Borrow, a facility for the IMF to lend money to struggling economies,
- US$250 billion for increasing trade finance,
- US$250 billion allocation of Special Drawing Rights (SDR) which give IMF members the right to drawn down foreign currency in a crisis,
- US$100 billion in commitments for the multilateral development banks to lend to poor countries.

Third G-20 Summit: G-20 Pittsburgh summit

IMF reforms were radically discussed.
G-8 was superseded by G-20 and the G-20 became new permanent council for international economic cooperation

Fourth G-20 Summit: G-20 Toronto Summit

A decision for reducing debt-to-GDP ratio in each economy by 2016 by taken.
A key agreement the leaders of deleveloped nations made was to cut annual budget deficits in half by 2013.
Institutions would be required to keep a higher amount of financial capital in case of future financial shocks.
Green growth was discussed.

Fifth G-20 Summit:

The Fifth G-20 summit took place in Seoul, South Korea on November 11–12, 2010. The summit was aimed as safeguarding the global economic recovery and defusing trade and currency tensions.
The theme was “G-20’s Role in the Post-Crisis World.
The Seoul Summit was the first G-20 Summit outside a G-8 country, and the first in Asia .
Outcome of the Seoul Summit 2010 were as follows:
- Global Imbalances: Nothing substantial came out of the recently held summit except to continue the previously taken measures. The summit ironed out rifts between export-rich countries and debt-laden consumer nations and the summit could not go beyond the “framework” for balanced growth, and submitted medium-term economic plans for IMF review to ensure they do not clash, something that was decided in the previous summits.
- Current Account Imbalances: The G20 leaders instructed their finance ministers to draw up a set of “indicative guidelines” to measure large current account imbalances, in consultation with the IMF. The details have to be discussed in 2011.
- Currency: The Washington had a tougher time. The leaders of the G-20 vowed to move towards market-determined exchange rates and shun competitive devaluations.
- Basel III: The leaders signed off on the “Basel III” agreement to raise the quality and quantity of bank capital. Financial Stability Board’s proposals to tighten supervision of the over-the-counter derivatives market and reduce reliance on credit rating agencies was also endored by the nations.
- South Korea and the United States failed to seal a long-stalled free trade agreement. This was mainly because of the disagreement over access for U.S. carmakers to the South Korean automobile market.
- IMF reforms: A package of reforms thrashed out by finance ministers to reform the International Monetary Fund to reflect a shift in the balance of global economic power was endorsed and now more than 6 percent of voting shares at the Fund will shift to dynamic developing countries.

The 6th G-20 Summit, Cannes, France

The 2011 G-20 Cannes Summit was the sixth meeting of the G-20 heads of government in a series of on-going discussions about financial markets and the world economy. The summit resulted in little progress on the issues under discussion.

Outcomes of the G-20 Cannes Summit 2011

IMF/EU Supervision Of Italy Economic Reforms:
- In this summit, Italy agreed to have the International Monetary Fund monitor its progress on a quarterly basis.
- The IMF team would go to Italy by end-November and said the conclusions of its regular and independent monitoring of Italy would be published.
On IMF Resources:
- There was a broad agreement to ramp up the IMF’s warchest to help stop euro zone contagion plunging the world back into recession. No numbers were fixed, but countries such as Britain, China and Australia said they were ready to inject new funds into the IMF, either through bigger quotas or through additional money for the IMF’s New Agreements to Borrow (NAB) crisis fund.
- The NAB has to be reauthorized every six months by the IMF executive board, the last time being in September.
- IMF chief Christine Lagarde said there would be no cap or floor on new resources.
- There are discussions about boosting global liquidity by allocating IMF Special Drawing Rights to every member country, which boost their national reserves, as was done in 2009.
- Furthermore, euro zone members are discussing possibly pooling their SDRs to build a fighting fund that could support vulnerable peripherals such as Italy and Spain.
On Foreign Exchange Policy:
- Agreement to move “more rapidly” toward market-determined exchange rate systems and enhance forex flexibility to reflect underlying fundamentals and avoid competitive devaluations.
- The final communiqué mentions China by name for the first time in the context of greater currency flexibility and said it “welcomed China’s determination” to increase forex flexibility.
On Capital Controls:
- Agreement on guidance for the management of capital flows with the aim of preventing and controlling risks that could undermine financial stability and sustainable growth.
- An action plan supports developing local currency bond markets, scaling up technical assistance from international institutions, improving data bases and preparing progress reports to the G20.
On Action Plan for Jobs, Growth:
- Under a package to reinvigorate growth and employment, the United States commits to timely near-term measures to sustain economic recovery.
- Australia, Brazil, Canada, China, Germany South Korea and Indonesia agree to let automatic fiscal stabilizers work and support domestic demand.
- Emerging economies that are in surplus pledge to move toward domestic-led growth. Italy pledges to bring its budget “close to balance” in 2013.
On Financial Regulation:
- Agreement to strengthen regulation and oversight of the shadow banking system, endorse the Financial Stability Board’s initial 11 recommendations and develop them in 2012.
- Commitment to implement IOSCO measures to address risks posed by high-frequency trading and so-called “dark liquidity.” Request to IOSCO to assess by the G20’s next summit the functioning of credit default swap markets and their role in asset pricing.
For BANKS:
- The G20 named 29 banks as being so important to the global financial system that they are likely to need to hold more capital than rivals and must put in place a plan to let them be wound up without taxpayer help were they to hit trouble.
- Of the list of so-called SIFIs, 17 are from Europe, eight are U.S. banks, including Goldman Sachs, JP Morgan and Citigroup, and four are from Asia, including Bank of China.
On Commodity Price Volatility:
- Agreement to boost agricultural output and tackle food price volatility to meet growing demand from a world population expected to reach 9 billion people by 2050.
- France won backing for its proposal to limit commodity futures positions of big investors as a way to crack down on speculation. France had also sought tighter regulation of physical commodity trading.
On Tax On Financial Transactions:
- No agreement on the creation of a global tax on financial transactions, although France will now push the idea of a pan-European tax via the European Commission.
- Opposition to the idea remains widespread although the United States would not stand in the way of a European tax and Brazil would not block any push for a global tax.
On Tax Havens:
- Agreement to a multilateral convention to tackle tax evasion more effectively that includes automatic exchange of information and tax collection assistance.
- The convention also imposes safeguards to protect confidentiality of information.
On SDR issue:
- Agreement that the IMF’s SDR basket composition should be adjusted over time to reflect the changing nature of currencies, with a review of the basket set for 2015 and a request made to the IMF to further clarify current entry criteria.
On International Monetary System:
- No tangible progress on a long-term G20 goal to work toward a more stable and resilient IMF that would better reflect the increased weight of emerging markets, but the group affirmed a will to take concrete steps on this front. (with inputs from wikipedia, BBC, Reuters and CNN)