Senior cabinet members dampen expectations of global spending deal
Ministers were struggling to maintain momentum for the G20 summit last night after it emerged that any spending decisions would be deferred to a later meeting, further narrowing the scope of this week's London talks, which have been plagued by divisions between European leaders and Gordon Brown.
Yesterday, Kevin Rudd, the Australian prime minister who will hold pre-summit talks with Brown tomorrow, said it was now up to the International Monetary Fund to determine how much additional support the world economy would need next year, and that there had never been any expectation that the decisions on that package would be taken in London.
"That was never the intention," he said. "A mechanism has been established for us to reflect on for what we need for the future. There will be a further summit, well in time for 2010, I assume, which will actually look at what metrics, what numbers, will be needed then."
Silvio Berlusconi, the Italian prime minister, has already suggested that the G20 leaders meet again in Sardinia in July at the end of the scheduled G8 summit, but yesterday Downing Street suggested that a further summit at which this week's issues might be revisited would be unlikely to be held before 2010.
Yesterday cabinet ministers including the foreign secretary, David Miliband, the chancellor, Alistair Darling, and the chief secretary to the Treasury, Yvette Cooper, stepped in to dampen expectations and tried to clarify the aims of Thursday's G20 meeting. All said it had never been about securing agreement on extra public spending. "This is about trying to tackle an exceptional economic crisis ... This G20 summit was never about writing national budgets," said Miliband.
Darling said that it was important not to be "overly optimistic" about what could be achieved. "It is important, but it is not the end of the process. It is part of a continuing process," he said.
Cooper said: "What we are not going to have is a process in which finance ministers are writing their budgets in the course of next week. That was never the process that you go through."
Downing Street maintains that the prime minister has never regarded greater public spending as the only option. However, opposition parties point out that at times, during the run-up to the G20, No 10 has indicated that Obama's call for fiscal stimulus programmes should be "sustained until demand is restored".
Tim Geithner, the US treasury secretary, had at one point suggested an average 2% stimulus this year.
The EU has said it will not be going further than the measures already announced, which amount to 4% of the EU's combined GDP.
Last week any suggestion of a fresh round of global stimulus was thwarted by an unlikely coalition of the Bank of England's governor, Mervyn King, the German chancellor, Angela Merkel, and the Czech prime minister and EU president, Mirek Topolanek, who all spoke out separately.
Speaking to a regional congress of her Christian Democratic party in Berlin at the weekend, Merkel said: "The world stands at a watershed. We cannot afford crises like this every 10 years. We need a global order for the financial markets, the likes of which we've never seen, in order to learn the lessons from this disaster."
The EU will be heavily represented at the G20, occupying more than one third of the seats - the UK, Germany, France, and Italy as well as Spain and the Netherlands plus the Czech EU presidency and José Manuel Barroso, the European commission chief. European leaders are worried that Obama's huge public spending programmes could fuel hyperinflation and leave Europe struggling to refinance colossal levels of state debt if they followed suit.
At the weekend Michael Froman, a senior White House official dealing with the G20, continued to insist on fiscal stimulus, although the timing of countries' spending plans was left vague. "First is putting in place significant stimulus to get growth going," he said. "Secondly, fixing each of our financial systems to get lending flowing; third, avoiding protectionism; and fourth, taking steps to minimise the spread of the crisis to emerging markets and developing countries."
The communique will also contain broad commitments that countries should follow globally agreed principles on bank capital ratios, reshaping executive bonuses and national regulation.
The G20 meeting is predicted to attract demonstrations, but the business secretary, Peter Mandelson, called for a cessation of hostilities towards bankers and banks. He urged the public to give banks a bit of "breathing space". Mandelson said: "Now that we are starting to see the banks just starting to unblock, unstick themselves, unsqueeze themselves, let's give the banks a bit of a breathing space to give them some chance and some time to do their job differently and better.
"We have had a good bashing of the banks, we have put in place the measures to change them, we are going to make them more transparent and we are going to strengthen their internal corporate governance as well," he said.
He acknowledged that tensions were high. "There is understandable frustration and some anger. The global economic system has stalled, and what we have got to do is get it started. People ... want to see some effective co-ordinated action from their political leaders and from their governments."
Copyright Speakers Corner 2016