Share this Mister Wong Digg Del.icio.us Slashdot Furl Yahoo Technorati Newsvine Googlize this Blinklist Facebook Wikio Hear this text Print E-mail

Economic summits do not seem to be good value for money

This past weekend’s economic summits of the G8 and G20 in Canada came at an estimated direct cost of one billion Canadian dollars, or more than R7bn, not calculating the direct and indirect cost of the violent protests that accompanied it. Was this money well spent? Judged by the first reactions of the markets and some analysts, decidedly not. It seems to have been a non-event.

At the start of the events, there were signs of deep rifts at the G8 over how quickly governments should cut deficits added to financial market jitters today, with the Americans warning of the dangers of a double-dip recession if all countries began reining back spending at once.

In the end, the final statement that emerged from Toronto on Sunday chose the term "fiscal consolidation" as the compromise “catch-all”. It promises to cut deficits, boost growth and stabilise the markets. The communiqué committed advanced economies to at least halve deficits by 2013 and stabilise or reduce government debts by 2016.

It held little sway for Asian stocks on Monday, however, as China strengthened the yuan anew.

Joint statement

The joint statement warned that "failure to implement consolidation where necessary would undermine confidence and hamper growth".

But the statement itself, however, was so thick with caveats that many analysts said it did not apply strong enough pressure on debt-ridden governments.

Mizuho Corporate Bank market economist Daisuke Karakama is quoted in one report as saying: "They achieved the goal of being neutral to markets – it's a statement of little meaning."

In the first day's trade after the summit, Hong Kong ended 0.17%, or 35.89 points, higher.

Possible future arrangement

The new kid on the international leadership block, British Prime Minister David Cameron, indicated that he would be taking austerity to a new level when it is his turn to host the G8 in 2013. He has already warned that the get-togethers risk becoming no more than elaborate talking shops that cost huge sums and cause disruption to thousands, but deliver little of lasting substance.

Word has it that he is interested in the possibility of returning to the "fireside chat" model originally adopted when the first meeting of what was then the G7 was convened by former French president Valery Giscard d'Estaing in the 1970s.

To save costs, the G8 could also possibly be linked to other international events already attended by the leaders of the countries involved: Britain, the United States, France, Germany, Italy, Canada, Japan and Russia.

The new G20 grouping – which became particularly prominent during the financial crisis of 2008 and which includes major economic powers China, India and Brazil and representatives of all continents, including South Africa, Saudi Arabia and Australia – could take on the more formal role of developing and co-ordinating specific international action on issues such as the economy and climate change.

It remains to be seen whether the developing economies – which went into the Toronto summit with warnings that there should not be attempts to put in place one-fit-all solutions which do not take proper note of their needs – will be comfortable with such an “old schoolboy club” arrangement.

Write comment

Your Contact Details:

Name:

Email: do not notifynotify

Comment:

Title:

Message:

Security

Please input the anti-spam code that you can read in the image.