Reason to exist

The Pittsburgh summit of G-20 September 24-25 had been announced shortly after the London summit in April. Though it has no institutional or legal foundations,G-20 has transcended initial meetings of finance ministers and central bank governors to become a major forum for major economies in the world to discuss global economy and financial markets. There are several items on the agenda.

First,aided by fiscal stimuli in various countries,not always coordinated,there are signs of economic recovery. However,such stimuli have fiscal costs and inflationary potential. A review of these measures,with gradual withdrawal,is inevitable. Second,recovery has occurred without consensus on the content of domestic financial regulation,such as leverage ratios,de-linking commercial banking from investment banking and norms on credit-rating agencies. For instance,there are differences in perspective between EU countries and the US on remuneration practices in banks. Third,prospects for the Doha Work Programme may be brighter now,but there are no signs yet of the impasse having been broken. Both protectionism which has increased,including within G-20 and revival of multilateral negotiations a ministerial is due in October will be priority items. Fourth,there will be talk of reforming international financial institutions and global financial architecture. In practice,this means the IMF though the Financial Stability Forum and World Bank also figure,and there are questions of decision-making processes within the IMF,subscriptions and rebalancing of quotas. Fifth,with Copenhagen slated in December,climate change cannot be off the agenda and there is no consensus yet on who commits how much on reductions and who bears the costs. This brings in ODA official development assistance to developing countries,relevant beyond climate change,since both private and official capital flows to developing countries suffer in times of downturn. It will be unrealistic to expect significant consensus in Pittsburgh and,at best,the communiqué will set out broad principles.

But two questions remain. First,once recovery becomes more broad-based,will G-20 meetings remain relevant,especially if not hosted by the US or Britain? Second,should the G-20 have institutional backing with a secretariat and transparent norms for membership? Of three broad areas listed in London,with growth and employment recovering,macroeconomic coordination is now more about exit than continuation. However,the other two reform of the financial sector,reform of international financial institutions will remain as major issues and there is a danger that when shoots turn greener,major economies will lose interest in the G-20 process.