Wednesday

8th Jul 2020

Wins and losses for EU at G20

A range of compromise agreements enabled leaders to save face on Sunday (27 June) as the Group of 20 meeting in Canada drew to a close.

A declaration on cutting national budgetary deficits in half by 2013 was heralded as a victory by EU politicians, but European hopes for a global bank levy fell by the wayside.

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  • G20 leaders listened to some of Europe's concerns (Photo: Commission)

"The summit's result reflects widespread convergence around Europe's approach," European Commission President Jose Manuel Barroso and European Council President Herman Van Rompuy said in a joint declaration after the event.

Major G20 states had already agreed to similar deficit-slashing targets prior to the Canadian meeting however, with language on the continued need for short-term stimulus measures reflecting US concerns.

Recent weeks have seen Washington engage in a war of words with a number of European capitals over concerns that European countries' austerity drives could put the brakes on the world's tentative economic recovery.

US President Barack Obama welcomed the G20 compromise agreement, but warned his country would no longer remain the global consumer of last resort. "No nation should assume its path to prosperity is paved with exports to America," he said.

Leaders also agreed to "stabilise" their debt levels by 2016, a statement designed to reassure jumpy financial markets that governments are serious about learning to live within their means.

Weak language in the final communique highlighted the divergency of views on a global bank levy, with countries that avoided the worst of the financial crisis such as Canada, Australia and Brazil, opposing the idea.

Instead, leaders agreed that there is a range of possible policy approaches for making banks pay a "fair and substantial" contribution toward future bank bail-outs. "Some countries are pursuing a financial levy. Other countries are pursuing different approaches," said the summit's final statement.

Should countries such as Germany, France and the UK decide to push ahead anyway, the weekend's decision means European levies are likely to be smaller as a result, in order to prevent banks simply moving to more lenient jurisdictions.

Bank Capital

Progress was made on the question of capital buffers for banks, a measure intended to ensure financial firms can better withstand economic shocks in the future.

Under the plans, set to be finalised at the next G20 meeting this November, banks will be compelled to hold more top-grade capital. "The amount of capital will be significantly higher and the quality of capital will be significantly improved when the reforms are fully implemented," said the final communique.

In a move to allay European concerns that the new requirements could stifle lending if implemented too quickly, the previously mooted 2012 deadline for the shift was scrapped.

The phase-in will now "reflect different starting points and circumstances" of G20 member states.

Meanwhile police said over 600 people had been arrested over the course of the weekend, as peaceful protests turned violent on Saturday. Windows were broken and police cars set on fire.

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