BALI, Indonesia — Twenty of the world’s most powerful men and women will meet here this week with the global economy weakening by the day, developing countries facing a looming debt crisis and war raging in Europe.
Divided over Ukraine war, G-20 summit struggles on economic agenda
To say that expectations are low for the annual meeting — which will draw President Biden and Chinese President Xi Jinping, as well as leaders from Europe and emerging powers such as India and Brazil — would be an understatement.
A gathering that began at President George W. Bush’s invitation in 2008 and helped coordinate the global response to the worst financial crisis since the 1930s has devolved into a rudderless talking shop that may struggle even to produce an official communique.
“The main appeal of the G-20 is the ability to force countries’ leaders in the same place and at the same time to interact. The actual outcome of the G-20 is likely to be very unsatisfactory, if there is any consensus output at all,” said Douglas Rediker, founder of International Capital Strategies, an investment advisory firm in Washington, D.C. “It’s been on a steadily downward trajectory for a long time.”
The G-20’s current plight contrasts with its initial vigor.
At the leaders’ second meeting, in London in April 2009, they agreed to collectively spend $5 trillion to boost global demand, provide an additional $1.1 trillion for the International Monetary Fund and tighten financial regulations.
Five months later, when the leaders met for the third time in less than a year, President Barack Obama and his counterparts declared the G-20 “the premier forum for international economic cooperation.”
Ever since, the group has been searching for a second act.
“The G-20 is not what it was in 2008, 2009. We are missing that sense of common purpose,” said Matthew Goodman, senior vice president for economics with the Center for Strategic and International Studies in Washington.
In 2009, the United States, China and Russia worked together to prevent the financial crisis from plunging the world into a depression. In a memoir, Obama wrote that “probably the single best piece of news” he received at the London summit was China’s commitment to a major economic stimulus package.
This year, any notion of shared endeavor has become a casualty of the widening split between the United States, on one hand, and Russia and China, on the other. Russian President Vladimir Putin is staying home; his foreign minister, Sergei Lavrov, will attend in his stead.
But there will be a meeting between the U.S. president and Xi, who are scheduled to meet in person on Monday for the first time since Biden’s inauguration. They are expected to tackle disputes over Taiwan and U.S. efforts to block China from acquiring advanced semiconductors.
For their part, European Union officials have sought to lower expectations, hinting in the run-up to the summit that the leaders may be unable to muster the diplomatic bare minimum: a joint statement.
That’s what happened last month when G-20 finance ministers and central bank governors met in Washington. Discord over Russia’s invasion of Ukraine thwarted efforts to produce an official communique, the standard diplomatic product that closes such discussions. Instead, the Indonesian chair issued her own “summary,” which noted multiple splits between members.
Institutions such as the G-20 are struggling today because the global economy’s ills stem from the war in Ukraine, rather than the sort of financial problems that tipped the world into recession in 2009, according to Kristalina Georgieva, the managing director of the International Monetary Fund.
“You can’t solve a problem of geopolitics with economic policy measures,” she said. “It will be very difficult to bring the level of economic cooperation to the level it should be. … Ending the war in Ukraine is the single most powerful factor to turn around the world economy.”
Still, the White House insisted this week that the G-20, whose members represent more than 80 percent of global economic output, remains effective.
“The president believes very centrally in the ongoing importance of the G-20,” said a senior administration official who briefed reporters on the meeting, speaking on the condition of anonymity.
The summit is where “the world can come together to talk through the important challenges that we face,” he added.
Even if the full group fails to agree on bold initiatives, the president anticipates productive one-on-one talks with other leaders. In addition to Xi, he is scheduled to meet privately in Bali with the leaders of Indonesia, Italy and the United Kingdom. Chief topics include plans for a previously announced global infrastructure initiative, soaring food and energy prices, and the need to beef up the IMF and World Bank.
The G-20 also is expected to tackle its sluggish progress at addressing rising debt in the developing world.
In November 2020, the group agreed on a “common framework” designed to provide debt relief to some of the world’s poorest countries, which borrowed heavily to combat the pandemic.
Two years later, only three countries have participated. Officials have struggled to win support from China, the world’s top government lender, and from private-sector financial institutions.
“The debt crisis is intensifying,” the United Nations Development Program warned last month, as it identified 54 countries with severe debt problems, including Somalia, Argentina and Laos.
The summit’s principal focus, however, is likely to be fallout from Russia’s invasion of Ukraine, particularly the subsequent commodity price shock that it unleashed — issues where agreement between the Russian government and the rest of the group is unlikely.
A key question is whether China will throw its weight behind Russia in negotiations or seek to rally others to the Kremlin’s cause. Though Xi has yet to condemn Russia’s war in Ukraine, the Chinese leader spoke against nuclear war — a remark some diplomats took as an oblique warning to Putin — during a recent meeting with German Chancellor Olaf Scholz.
European officials say they have seen no evidence that Beijing will drop its backing for Moscow. A senior E.U. official, speaking on the condition of anonymity to discuss private conversations, said the Russian and Chinese sides appeared to be aligned in preparatory G-20 meetings. This coordination brings “additional challenges to finding the ability to have a common statement,” the official said.
In turn, the Ukraine logjam makes joint action on global economic maladies more difficult even as they are becoming more numerous. Growth is slowing or expected to slow in the United States, Europe, the United Kingdom and China, while high food and energy bills resulting from the conflict in Ukraine are driving poor nations in Africa, the Middle East and Asia deeper into debt.
Inflation is near four-decade highs in most advanced economies, and markets are struggling to adjust to a new financial climate, as the Federal Reserve and other major central banks raise interest rates.
“These challenges make global cooperation on financial stability matters as important now as it was after the global financial crisis,” wrote Dutch central banker Klaas Knot in a letter to the leaders this week. Knot chairs the Financial Stability Board, established by the G-20 in 2009 to provide early warning of systemic risks.
Creation of the leaders’ summit was a response to an economic emergency. But it also recognized 21st-century economic reality. Where once the United States and a handful of its allies represented the bulk of global commerce, emerging economies, particularly Brazil, Russia, India, China and South Africa, became increasingly prominent by the early 2000s.
These nations — with roughly 40 percent of the world’s population — had been promised for years a greater say in running international institutions. Amid a global crisis that many blamed on Wall Street’s financial excesses, it seemed an appropriate moment for the global torch to pass to a wider group.
“When the G-20 was elevated to the leader’s level, it was a recognition that you can’t manage the economy from a cozy Western boardroom,” said Stewart Patrick, senior fellow at the Carnegie Endowment for International Peace.
The irony is that the smaller, richer club of the G-7 has been reinvigorated by Russia’s war in Ukraine after foundering during the Trump years. The U.S. and its European allies have led the response to Russia’s invasion, marshaling others to isolate Moscow and support Ukraine.
“The Biden administration has done a good job of rallying advanced market democracies,” Patrick said. “The difficulty has been trying to assemble a broader coalition.”
Lynch reported from Bali; Rauhala reported from Brussels. Beatriz Rios in Brussels contributed to this report.
Source: WP
