Thursday

9th Dec 2021

EU presidents give bloc pre-G20 pep talk

  • France is chair of the G20 for 2011 (Photo: Elysee palace)

Ahead of the G20 meeting of leading world economies and in the wake of ever-sharpening international criticism of Europe’s ‘dithering’ response to the eurozone debt crisis, EU presidents Herman van Rompuy and Jose Manuel Barroso have given the bloc’s member states a ‘pep talk’, saying that the EU needs to demonstrate it can act but also demanding that foreign governments need to make a “constructive contribution” too.

“Our G20 partners' perception is that if Europe does not solve its sovereign debt crisis there will be dangerous spillovers on the global economy,” the pair wrote in a letter to the 27 EU member states on Monday (10 October), acknowledging global opprobrium being heaped upon Europe.

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“We need to show them that the European Union is determined to do whatever necessary to overcome the current difficulties,” they said.

Calling for a renewal of the “collective G20 spirit”, the two presidents - Barroso is in charge of the European Commission, while Van Rompuy heads up the European Council - wrote how Europe “should be proud to have been instrumental in the creation of the G20 process.”

“The fact that France holds the G20 Presidency this year gives Europe a special responsibility.”

Elsewhere in the letter, Barroso and van Rompuy wrote “The EU needs to demonstrate that we are aware of our own responsibility and fully engaged in addressing the challenges we face.”

The letter points out how the EU was the first within the G20 to deliver on a G20 commitment to raise capital requirements for financial institutions, and argues that other powers have yet to step up their game: “Our G20 partners have to deliver as well and together we should accelerate work to advance on other agreed reforms."

The pair hit back at other G20 actors, saying risks came not only from Europe, but other economies as well: “We will also demand from our G20 partners a constructive contribution to face the global economic challenges.”

They said that pre-crisis imbalances in the global economy remain in place “including undervalued exchange rates in key emerging surplus economies,” - a reference to China’s massive trade surplus and what Washington and Brussels describe as its undervalued currency.

They added that there needed to be “a balanced discussion of the various risks to the global economy, including those coming from the US and from emerging market economies.”

Barroso and Van Rompuy outlined what the EU should try to get out of the upcoming G20 meeting, to take place from 3-4 November in Cannes, calling for an ‘action plan’ of measures.

Specifically, the pair said that further work needed to be done on reforms to derivative markets, banking crisis prevention, ‘shadow banking’, globally agreed accounting standards and “ambitious measures” on systemically important financial institutions.

The pair also want to see a strengthening of economic surveillance by the International Monetary Fund, a boost to the IMF’s resources and an expansion of the international lender’s “toolkit” to support countries facing bond-market stress.

The letter placed an emphasis on boosting trade as “the most effective way to support global growth”. Acknowledging that a conclusion to the WTO Doha Round negotiations will not be achievable by the end of this year “despite our intensive engagement and that of some others”, the pair warned that the stalemate “risks encouraging protectionist measures”.

The two presidents also argued for further discussions about a global financial transaction tax at the G20 level. The European Commission has proposed the introduction of such a levy at the EU level. This is despite opposition from the UK, which says that such a move should only be introduced if it is agreed by all world powers so as to avoid financial institutions packing up and leaving in particular the City of London for jurisdictions that have not imposed such taxes.

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