As part of its G20 in the Global Economy initiative, the German Marshall Fund’s Economic Policy Program hosted former Bolivian President Jorge Quiroga on December 2, to recap the G20 Seoul Summit and present a report by the Club de Madrid titled “The G20’s Role in the Post-Crisis World.” The briefing, which was intended to inform G20 embassy economic and political counselors, was moderated by GMF’s Senior Director for Policy Programs Thomas Kleine Brockhoff. Kati Suominen, GMF’s G20 Resident Fellow, and Stefan Schirm, Senior Fellow at the Transatlantic Academy, served as discussants and presented their views on the November Leaders’ summit.
At the breakfast briefing, President Quiroga, a member of the Madrid based organization composed of 79 former democratic presidents and prime ministers, provided an overview of the report’s recommendations. The report, which aims to enhance the G20’s effectiveness and credibility by holding leaders accountable to their previous commitments and by encouraging policymakers to show strategic foresight in reinforcing the G20’s role in global economic governance, was intended to provide recommendations and advice to the Korean G20 presidency ahead of the November 2010 Summit meeting. One of the main recommendations presented by President Quiroga calls for countries chairing the G20 to reach out to regional organizations ahead of summit meetings in order to establish a dialogue with non-G20 members and to encourage member states to act as regional representatives at summit meetings. Quiroga stressed that outreach and coordination are necessary in order to effectively enhance the G20’s legitimacy as a globally representative forum capable of incorporating non-members’ perspectives in addressing pressing challenges.
In her assessment of the Seoul G20 meeting, Kati Suominen focused on the G20’s challenge in accomplishing its intended goal of achieving strong, sustainable, and balanced growth as indicated in the leaders’ declaration in Korea. According to Suominen, although growth rates in emerging economies are strong and have eclipsed those of advanced western economies, balanced and sustainable growth will be challenging to achieve in the long-run without strong growth rates in the United States. Furthermore, the risks of rising protectionism and continued state intervention in exchange rate markets will present a further challenge to redressing perpetual imbalances and global economic instability now and for years to come. Uncoordinated and erratic state responses to imbalances, such as the implementation of controls on capital inflows, will only exacerbate tensions and hamper global trade and foreign direct investments, which Suominen stated are vital prerequisites to achieving the G20’s goals of attaining sustainable growth on a global level.
In his presentation, Dr. Schirm stressed that a clear transatlantic divergence emerged at the Seoul summit regarding views on stimulating growth, which were exemplified by Germany’s public criticism of the Fed’s quantitative easing strategy announced prior to the meetings in Korea. According to Schirm, the U.S. announcement on QE2 ahead of the summit meeting “provided the EU with new partners—namely China and Brazil” regarding views on currency and trade. Dr. Schirm also referenced the G20’s commitment to reforming the governance structure of the IMF by reallocating seats at the Executive Board to give more equal representation to emerging economies such as China, which in 2012 is projected to have the third highest share of voting quotas ahead of Germany. In addressing the fact that two European countries will be asked to give up their seats at the Executive Board level, Dr. Schirm stated that it remains to be seen how Europe will coordinate internal adjustments regarding institutional reforms within Bretton Woods institutions.