14 February 2009

Finance ministers from the Group of Seven (G7) group of industrialised nations issued a strongly-worded communiqué at the end of their two-day meeting on 14 February in Rome, pledging to avoid protectionism and agreeing on the need for 'exceptional measures' to restore economic and financial stability.

The seven countries – Canada, France, Germany, Italy, Japan, the UK and the US – agreed on a range of measures including measures to restore long-term credit flows, reform of the International Monetary Fund and the Financial Stability Forum and regulatory reform. They also singled out China, one of the major emerging economies that will be present at the London Summit, for their fiscal stimulus package.

Although the G7 includes fewer than a half of the countries that will attend the London Summit of the G20 on 2 April, the communiqué shows agreement on many of the key issues that are likely to be up for debate at the larger meeting. Russia, which is a member of the G8 and G20, attended as observers as did leaders of the IMF, World Bank and World Trade Organisation.

Alistair Darling, the British Chancellor, described this weekend's meeting as a 'stepping stone' towards the London Summit of  developed and developing nations meeting in London. He said: 'I believe we are seeing now determination by countries right across the world to help families and businesses in their own countries but also to work together to sort out the continuing banking problems so we can get lending going again.'

As had been widely predicted before the meeting, several ministers spoke out against the danger of governments putting up protectionist barriers. Timothy Geithner, the new US Treasury Secretary, said: 'All countries need to sustain a commitment to open trade and investment policies which are essential to economic growth and prosperity.'

Some people have criticised the US Government’s ‘Buy America’ clause in its fiscal stimulus package. But Giulio Tremonti, Italian finance minister and chair of the summit, said ministers knew ‘Buy America’ was 'a slogan'. 'At the G7 we talked about 'buy America' as a slogan. I don't think the measures taken so far in the world are dangerous or indicative of dangerous tendencies.'

Significantly, Tremonti said that the work carried out by the G7 would be passed on to the G20 ahead of the London Summit. Peer Steinbruek, the German finance minister, echoed that saying: 'From the German view, we have a great interest in there being very concrete results in London.'

13 February 2009

The meeting of the finance ministers and central bankers from the Group of Seven (G7) countries is the first major step on the road to the London Summit. Since the G7 only covers the major industrialised economies – Canada, France, Germany, Italy, Japan, the UK and the US – key decisions will be left for the London Summit. However the communiqué at the end of their two-day meeting will highlight key areas for action.

Italy, which chairs the G7 this year, has said it will push for the adoption of a more modest ‘legal standard’, something Italian Treasury documents describe as 'minimum rules on transparency and propriety of international business which the whole international community is expected to accept'.

France has called for countries to adopt tougher standards for financial regulation. In an interview with the Financial Times, Christine Largarde, the French finance minister, says that a platform of sound and safe regulations is a key priority for restoring confidence. She also appeals for greater coordination of bank support measures and other state aid policies at a European level.

‘Because the economic situation is such, people – I think in good faith – are more focused on stimulating growth and resuming lending – that is, those who are pouring money into their financial systems and not seeing much benefit out of it,’ she said.  Read the full transcript.

Giulio Tremonti, Italy’s economy minister, has said that the world should not copy the ‘American way’ of using government interventions over the last years, saying that it had led to higher public debate. 'Economic growth hasn't risen, but on the other hand public debts have risen,' he wrote in an article in Corriere della Sera newspaper, adding that 'the pessimism of reason' would suggest 'an alternative approach’.

According to the Wall Street Journal, Timothy Geithner, the US Treasury Secretary, will use the meetings to sell the American plan to set the economy back on track to his G7 counterparts.

Mr Geithner, who gave G7 finance ministers advance notice of his bank bail-out plan, is expected to give ministers a more detailed outline of the Obama administration's approach.

UK Chancellor Alistair Darling added that the UK would support US Treasury Secretary Timothy Geithner's push for a public-private partnership to help buy banks' soured assets, if he is confident that is the best way forward for the US.

Meanwhile Germany has warned that protectionist rhetoric could plunge the global economy back into a destructive spiral last seen in the 1930s. 'We will have to do everything to ensure history does not repeat itself,' said German Finance Minister Peer Steinbrueck. 'Right now, I think Germany has a huge interest in ensuring, at international meetings, that the world does not make the same mistakes it made in the 1930s.' Gordon Brown, the British Prime Minister has repeatedly said countries should not resort to protectionism.

The ministers will issue a communiqué at the end of the meeting at the Palazzo della Firenze some time during Saturday 15 February.