Amidst the Presidential election turmoil in the United States, there was another type of turmoil in Mexico City this past weekend, where the Finance Ministers of the G20 met to discuss the world’s economy and how to address the current financial challenges. Topics at the meeting included Japan’s currency issues, the U.S. “fiscal cliff,” and the European Union’s tensions between promoting job growth and austerity.
Even countries that have weathered the financial storm fairly well are starting to encounter economic issues that need to be addressed by the G20. For example, when the strength of the euro declined, investors flocked to the Japanese yen, impacting Japan’s export market. The relative strength of the yen has led to a decline in Japan’s previously strong automobile and electronics export industries. Japan now faces a trade deficit for the first in years. Japan Finance Minister raised Japan’s currency concerns at the G20 meeting, noting, “There weren’t any particular objections and I took that as showing other countries understand our concerns on currencies.”
Another major topic of discussion was the U.S. fiscal cliff, which several G20 policymakers see as the biggest short-term threat to global growth. Although no one had a specific solution for the United States, there was agreement that the U.S. should “carefully calibrate the pace of fiscal tightening to ensure that public finances are placed on a sustainable long-run path while avoiding a sharp fiscal contraction in 2013.”
Meanwhile, German Finance Minister Wolfgang Schaeuble continued to insist that Greece and other weaker members of the euro zone swallow austerity medicine even as their economies sink deeper into recession. Greek Prime Minister Antonis Samaras warns that if parliament does not approve a new round of austerity measures, Greece could be forced out of the euro.
Despite the urgency of these economic issues, little progress was made at the G20 meeting last weekend. The lack of progress may have been due not only to differing opinions, but also from fatigue from meeting just a couple of weeks earlier at the IMF’s annual meetings, and the absences of some significant players, such as U.S. Treasury Secretary Tim Geithner and European Central Bank president, Mario Draghi.
There may be one step forward from the meeting, however, as the Financial Stability board has requested the endorsement of the G20 Finance Ministers for the draft Charter for the Regulatory Oversight Committee of the Global LEI System. Part of the mission of the Financial Stability Board is to “coordinate at the international level the work of national financial authorities and international standard setting bodies and to develop and promote the implementation of effective regulatory, supervisory and other financial sector policies.” Under the proposed Charter, the Regulatory Oversight Committee would be responsible for governance of the Global Legal Entity Identifier System, which provides identifying information on legal entities who are parties to financial transactions throughout the world, hopefully creating more stability and transparency in the global economy. Although this may be a small step for a big problem, possibly getting an endorsement by the G20 and FSB for the Regulatory Oversight Committee Charter could be the one tangible step forward that came from this G20 meeting.
Katelin Knox is a 2L and a staff editor on the Denver Journal of International Law and Policy.