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BW Businessworld

Discordant Notes

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Even before the ‘green shoots' in the global economy make it to the harvest, differences are emerging among the gardeners about whether it was time to start thinking of moderating the fertiliser. At the G20 finance ministers meeting in London on 4-5 September, the divergence of views about whether it was too early to withdraw the fiscal stimuli was stark. Brazil held that withdrawing the stimulus could kill the green shoots, while Germany said investors could be put off by fiscal irresponsibility. France wanted action on excessive compensation through bonuses.

The other big concern — and a sticking point between the US and European countries — was capital standards. Europe believes that the Basel II accords deal with that adequately. But the US says that leverage ratios should be part of measuring capital standards; according to the US view, capital adequacy as a ratio of risk weighted assets can be ‘managed' by applying the right accounting policies. Leverage in European banks is rather high.

Before the global financial crisis of 2008, the G20 was a forum for finance ministers and central bank governors. But in the past year, the G20 heads of state met twice — at the Washington and London Summits — and will meet in Pittsburgh in the US on 24-25 September for the third time. If these summits become a permanent feature of international diplomacy, global governance as we know it will change dramatically. And oh, the other ‘green' item on the London meeting's agenda? The debate on climate change may be on the back burner for now.

(This story was published in Businessworld Issue Dated 21-09-2009)