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The G20's COVID Agenda

Heads of state and government from the world's largest economies will have plenty on their plate at this year's G20 summit in Rome on October 30-31. But with the COVID-19 pandemic still raging, it is clear what their immediate priorities should be.

CAMBRIDGE – Finance ministers, central bank governors, and political leaders are hard at work preparing for the 2021 G20 Heads of State and Government Summit in Rome on October 30-31. With the COVID-19 pandemic stretching well into its second year, the meeting will come at a time of heightened uncertainty about public health and the global economy. And though the mechanisms of international cooperation have been weakened by the pandemic and remain bruised by former US President Donald Trump’s legacy, they are more important than ever.

“Cooperation” need not refer to international coordination of national monetary or fiscal policies. For the most part, countries on their own can move those levers in whatever direction is best for them. Instead, the G20 should focus on financial stability, trade, and vaccination. This is in addition to other important areas, especially the existential issue of global climate change, which should and will receive a lot of attention.

Over the course of 2020, most countries responded to the health crisis and economic recession with government spending. But emerging markets and developing economies (EMDEs) cannot finance deficits as easily as can Europe and the United States (with its “exorbitant privilege” conferred by the dollar’s global dominance). Fortunately, many of these countries managed to meet the acute need for increased spending without having to pay sky-high interest rates, owing to the aggressive monetary stimulus provided by the US Federal Reserve and other major central banks. The initial declines in EMDE currencies, securities prices, and commodity prices in March 2020 were reversed after the Fed’s easing.