The Busan G20 Finance Ministers and Central Bank Governors' Meeting ended on June 5th with the presentation of the official communique after 2 days of discussions. The communique emphasized the need to improve fiscal soundness in the wake of the European sovereign debt crisis.
Held over a 2-day period between the 4th and the 5th, 40 finance ministers and central bank governors, as well as the managing director of the IMF participated in the meeting to lay a foundation for further talks at the Toronto Summit to be held 3 weeks later and the Seoul Summit Meeting to be held in November.
(Photo: Yonhap News)
With the financial market reeling from the aftershock of the European financial crisis, international cooperation to improve fiscal soundness was emphasized throughout the meetings.
On current global economic situation, the G20 ministers stated that "the global economy continues to recover faster than anticipated, although at an uneven pace across countries and regions. However, the recent volatility in financial markets reminds us that significant challenges remain and underscores the importance of international cooperation."
All participants agreed on the importance of financial repair and fiscal structural reform, and a consensus was made to put in place credible, growth-friendly measures differentiated for and tailored to national circumstances to deliver fiscal sustainability.
For those countries with serious fiscal challenges, the ministers recommended that they accelerate the pace of consolidation. At the same time, they need to expand domestic sources of growth within their capacity while maintaining macroeconomic stability, emphasizing the importance of economic growth along with the recovery from the crisis.
Also, the ministers have developed a "basket" of policy responses to build a "stronger, more sustainable and more balanced growth" and will submit these options for consideration by the respective leaders of the government at the June 2010 Toronto Summit.
Global financial safety net · consensus on five principles for bank levy
Concerning the development of a global financial safety net, proposed by Korea, recent events propelled the ministers to acknowledge a need for national, regional and multilateral efforts to deal with capital volatility and prevent crisis contagion. They have agreed to explore policy options to improve global financial safety nets, and in line with this effort, the IMF was tasked to make rapid progress in reviewing its lending instruments, with a view to developing and upgrading them, as appropriate.
As for inclusion of the financial sector in paying for burdens associated with government interventions, such as the global bank tax, the G20 has agreed to develop five principles:
· The need to protect taxpayers
· Reduce risks from the financial system
· Protect the flow of credit in good times and bad
· Taking into account individual country's circumstances and options
· Helping promote level playing field
But the nations are still far apart in reaching a consensus on the specifics of the proposal, and full consensus is expected to take some time.
In addition to the above proposal, the nations committed to accelerate the implementation of strong measures to improve transparency, regulation and supervision of hedge funds, credit rating agencies, compensation practices and OTC derivatives in an internationally consistent and non-discriminatory way, and to carry them out without setback.
As for work on banking supervision, the consensus will be met during the Seoul Summit, instead of the originally planned end-of-the-year deadline.
Other points of interest include the IMF quota reform which calls for a 5% shift in quota from advanced nations to emerging nations to be completed by the Seoul Summit, as well as reforms to IMF management structure to be accelerated.
Additionally, Korea's proposal to share its experience in industrialization with developing nations was met with much acclaim.
The next G20 Finance Ministers and Central Governors' meeting will be held in Gyungju, Korea in October.