Marketplace Middle East - Blog
3/12/09
Avoiding April Fools Days
I have the picture in my mind. A marathon will be run in London on 2 April with a whole group of global leaders not only stumbling at the finish line, but unclear where the ribbon marking the end really is.

Welcome to the upcoming Group of 20 Summit. If we go by the expectations outlined by Britain’s Chancellor of the Exchequer, Alistair Darling, the bar is being set very low.

"We must act together not as a small group of advanced economies but globally with the emerging and developing economies.”

This was Darling's opening statement before he welcomed his peers to a preliminary meeting two hours from London. That was a warm gesture to the faster growing economies of China, India, Turkey and Saudi Arabia. To be candid, I thought those niceties were covered off in Washington back in November.

"Our common interest need not contradict a country's self-interest -- in fact, it can complement it. And it's all part of rebuilding confidence," was Darling’s effort to rightly douse the protectionist tendencies inherent during a crisis.

Beyond the broad strokes, however, the host nation is providing little to grasp onto.

Perhaps this is the classic understated nature of the British approach -- offer few clues and deliver way above expectations. However, it is a strategy that could end with a terrible train wreck if, at the close of the summit on 2 April, world leaders look like they have been "fooling" around.

The British Chancellor rightly noted we cannot expect a "complete consensus overnight." Maybe we are using a different calendar, but this crisis is at least a year and a half old.

The transatlantic alliance seems to be alive and well at this critical juncture and the new U.S. President is already spending some political capital supporting Gordon Brown.

"We've got two goals in the G20," Barack Obama stated firmly. "The first is to make sure there is concerted action around the globe to jump-start the economy. The second is to make sure we are moving forward on a regulatory reform agenda."

Prime Minister Brown’s counterparts in Europe don’t quite agree with the first statement. There is a reluctance to prime the pump even more by flooding the market with the new buzz phrase "quantitative easing."

It is difficult to define the second goal.

French President Nicolas Sarkozy outlined some big plans for a new financial architecture last autumn -- a regulatory superstructure to better track those tricky derivative products that got us into this mess.

Sarkozy wants to rebuild the Bretton Woods institutions established after World War II -- the International Monetary Fund and the World Bank -- to play hardball in the 21st Century. It is a grand concept but support to move forward seems to be in short supply.

The British hosts say there is a wide-ranging agenda on the table 2 April. That, perhaps, may be the problem.

During his address to the U.S. Congress, we heard from Mr. Brown that shutting down tax havens and eliminating bonuses to non-performing bankers are priorities.

They may be hot button issues on the fairness agenda, but they will not solve the problem of recession or freeing up capital for businesses of all sizes or for consumers with good credit to borrow.

Those are the priorities being supported by the business community -- which is keen to avoid more regulation.

In the rough and tumble world of Texan politics there is a saying, which was coined by radio commentator and former populist politician, Jim Hightower, that the only thing you will find in the middle of the road are yellow stripes and dead armadillos -- the slow-moving creatures that often get run over by cars on the vast open highways.

In the Lone Star state they like people to take a stand on the left or the right. However, for this G20 Summit straddling the fence in the middle might not be a bad idea.

These leaders don’t need to recreate the wheel, but they do need to make sure there are not big boulders in the path towards recovery.

What does this mean in reality? The G20 should be able to leave the summit table with the following:

- An agreement to continue stimulus plans that complement a path to growth
- A final finish date for the Doha Trade Round -- to avoid any worries over protectionist policies are creeping into legislation
- A real structure and timeline to make the IMF a global regulator to create like-for-like standards for banks
-A concrete strategy to identify and set aside the toxic assets that are holding back lending and therefore growth
- Equal voting rights for all members of the G20 from Brasilia to Beijing and Ankara and Riyadh in between

If you walk the streets of any financial center right now, from businessmen to consumers you hear the same refrain: “When do you think this credit crisis end?”

That is the multi-million dollar question that the G20 can help answer.

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ABOUT THIS BLOG
John Defterios’ blog accompanies the weekly business program, Marketplace Middle East (MME) that is dedicated to the latest financial news from the Middle East. As MME anchor, John Defterios talks to the people in the know, finding out their opinions on the big business moves in the region, he provides his views via this weekly blog. We hope you will join the discussion around the issues raised.
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