G20 chiefs to fight fires singeing global economy

Updated: 2012-06-16 02:27

By Zhang Yuwei in New York (China Daily)

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China and other emerging economies are expected to play a crucial role at next week's G20 summit in Mexico, where world leaders will try to untangle problems afflicting the fragile global economy.

Heads of government in the Group of 20, which comprises the world's biggest industrialized and developing economies, will gather at the resort of Los Cabos on Monday and Tuesday, hoping to agree on ways to restore broad-based economic growth.

The summit comes as Europe continues its struggle to contain a virulent debt crisis, the United States meanders through a nearly jobless recovery and emerging markets adjust to growth that is a bit slower than in recent boom years.

All of this presents a new set of challenges for the G20.

"The short-term challenges facing G20 leaders have rarely been more daunting," said James Haley, director of the global economy program at the Centre for International Governance Innovation, a think tank in Canada. "Failure to address the immediate risks to the global outlook, however, could result in an even more difficult challenge: preserving the system of international trade and payments that has been painstakingly constructed over the past 65 years and which has lifted millions out of poverty."

While the debt crisis in the eurozone will be a major topic for discussion at the two-day summit, some experts say leaders should focus on long-term plans to drive economic growth. Toward that end, input from emerging-economy countries will be imperative.

"I think there's absolutely an important role for China and other emerging economies to play at this summit. They need to take advantage of Mexico's hosting of the summit to make clear to the European countries that the time for bold action is now," said Martin Edwards, a professor at the John C. Whitehead School of Diplomacy and International Relations at Seton Hall University in New Jersey.

China has actively participated in all meetings since the G20 was formed in 1999, a year after the Asian financial crisis. Since 2008 — the year a financial crisis erupted in the US — the bloc has gradually evolved into a high-level platform for leaders to address broad economic issues in hopes of coming up with strong, coordinated solutions.

"China has long played an important, responsible role in the collective management of the global economy," Haley said, pointing to Beijing's "stabilizing" influence in the Asian crisis and its help in leading the G20's response to current global problems.

Many developed economies face a "triple threat" of tepid growth, high public debt and looming demographic changes that "if not offset by higher-productivity growth, will constrain medium-term growth prospects," Haley said. The eurozone crisis may well push other items off the G20 leaders' already-overflowing plate.

On Sunday, the day before the summit, voters in debt-racked Greece will vote yet again on a national government, with the result possibly determining if the Mediterranean nation will continue using Europe's unified currency. News reports have said fearful Greeks — split over growth-constraining spending cuts demanded by their country's European Union partners — are moving money out of the country, hiring security guards, stocking up on provisions and otherwise preparing for an uncertain future.

"The summit is going to be following right on the heels of the Greek election, and the outcome of that is going to shape whether or not the crisis deepens," Edwards said.

Canada's Finance Minister Jim Flaherty said this week that the Greek election might create a "disruptive moment" before the G20 summit if Sunday's results lead to "disassociation of Greece from the pact that our European colleagues have developed with respect to austerity".

Jose Manuel Barroso, president of the EU's executive body, the European Commission, said a Europe-wide banking union could be established without changes to EU treaties as early as next year. Germany, however, opposes the plan on the grounds that such a union would unfairly burden taxpayers in wealthier European countries.

Europe needs policies to restore its competitiveness and must strengthen its governing institutions, said Hans Timmer, director of development prospects at the World Bank.

"Especially the banking problems cannot be solved by the individual countries; many of these institutions have become too large for individual countries," Timmer said, adding that moving to a European banking union would be "logical".

Contact the writer at yuweizhang@chinadailyusa.com