• G7 to end policy dominance with 5% vote shift
• China, India and others to take greater global role
Finance ministers from the rich G7 countries today surrendered the dominance they have held for a quarter of a century over economic policy-making when the group decided to end regular set-piece gatherings.
With power shifting from the west to the bigger developing nations, the G7 agreed at the weekend that from 2011 it would meet informally, and only when there was an issue of mutual interest.
The G7 has been a regular feature of the annual economic calendar since a meeting held at the Plaza hotel in New York in 1985 agreed to co-ordinate foreign exchange intervention to drive down the dollar.
But the deal means finance ministers and central bank governors of the United States, Britain, France, Germany, Japan, Italy and Canada will no longer convene formally at half-yearly meetings of the International Monetary Fund. Instead, they will return to the original concept of holding a "fireside chat" when members decide there is something pressing to discuss.
Chancellor Alistair Darling said: "We felt it might be better to meet more informally with less of an entourage so that we can have more detailed and business-like meetings." He added that there was still a need for the G7, but "the main focus will be the G20 for some time to come".
One G7 source said the emergence of the G20 – which includes China, India, Brazil and other emerging nations – meant that the G7 had to change or face irrelevance.
Meetings will take place without an army of hangers-on and the G7 will only issue communiques when it feels it has something to say.
The growing importance of China to the health of the global economy means the G7 no longer has the stranglehold on policy it once enjoyed. Participants have expressed frustration in recent years that Beijing's absence from G7 talks has prevented discussion of the Chinese yuan.
Darling and Christine Lagarde, the French finance minister, pushed the idea through the G7 meeting held in Istanbul on Saturday, with the only opposition coming from Italy.
France will put the new system into force when it takes the chair of the G7 in 2011, with the G20 given the key role in global economic governance. G20 finance ministers will meet just ahead of the spring and autumn IMF gatherings.
The G7 said its members needed to develop "exit strategies" that would allow them to withdraw the stimulus provided by low interest rates andwidening budget deficits once durable recovery was secured. It also called for reform of financial systems, including tougher control over derivatives.
The decision to scale back the G7 meetings comes amid suggestions that the IMF should be reshaped to reflect the shift toward emerging economies, meaning that Britain might potentially lose a permanent seat. Darling made it clear at the weekend that Britain would not give up its place, one of eight permanent seats, without a fight. There were also proposals for a G4 to represent the US, China, Japan and the eurozone.
A key panel of the IMF said today that it supports giving more voting power to emerging market and developing countries, warning that the legitimacy of the institution was at stake.
The group's International Monetary and Financial Committee said it backs a shift of at least 5% of voting power from countries with ample representation to those with little influence. The move would seek to reflect changes in the global economy, with strong growth in countries that once lagged far behind the richer nations.
Copyright Speakers Corner 2017