MADRID – The world financial crisis has served as a quick and efficient catalyst to the G-20. The first three G-20 summits of chiefs of state, in Washington, London, and Pittsburgh, will be remembered for advancing multilateralism and coordinated global action. But the G-20 remains very much a work in progress – and one that needs much work to succeed, as its most recent summit in Toronto demonstrated.
The G-20 summit in Washington in 2008 was the first at which the member countries’ chiefs of state met since the group’s creation in 1997. The G-8 was no longer an appropriate vehicle for global economic governance, given the need to stabilize financial markets around the world. The voices of countries such as China, India, and Brazil had to be heard if a coordinated response to the crisis was to be found. With the financial crisis worsening, the London summit in 2009 agreed to unprecedented fiscal and monetary stimulus and backed a stronger, more coherent regulatory and supervisory framework worldwide. In view of the G-20’s success, the Pittsburgh summit recognized it as the main forum for international economic cooperation.
This recognition raised expectations for the G-20 and granted it the prestige that it deserved: it is the only forum in which world powers and emerging countries sit as equals at the same table. The premise is clear: as the crisis made more evident than ever, the interdependence of countries is inescapable. In the face of today’s global challenges, the only possible response must be global. There is no possible alternative. But the imprecision of the agreements reached at the summit in Toronto in June has left political leaders with a bitter taste in their mouths.
Two clearly defined gaps stand out as causes of discord. The first is transatlantic divergence over how best to assure a return to solid growth. The United States favors continuing economic stimulus, while the European Union prefers fiscal consolidation. The other source of dissension is disagreement over a bank tax. The US, the EU, and Japan are in favor, while emerging countries, as well as Canada and Australia, are opposed.