Much has changed since leaders of the Group of 20 nations met in Washington on Nov. 15. President Obama has replaced George W. Bush, wrote The Washington Post in its editorial yesterday. Excerpts: A new economic team brimming with ideas has taken the reins in the United States. And the financial crisis that Obama inherited has, in many respects, intensified. The World Bank projects that the global economy will shrink this year for the first time in more than six decades. G-20 finance ministers meeting in England this weekend — representing, more or less, the world’s 20 biggest economies — will have their hands full.
Alas, odds are slim that the meeting will produce a bailout for Eastern Europe’s fledgling democracies, which are in an increasingly desperate financial situation. The World Bank’s call for the G-20 economies to allocate 0.7 percent of their stimulus packages to the developing world isn’t likely to be heeded. Indeed, the United States and Europe have differences of their own. European countries think the priority should be tighter international regulation of financial services. The Obama administration agrees with that as a long-term goal but emphasizes restarting growth; it wants G-20 countries to match the US fiscal stimulus package to the maximum extent, so that the average is 2 percent of GDP. This difference is partly due to differing domestic political timetables; whereas Obama enjoys a fresh mandate and at least four years to work with, German Chancellor Angela Merkel, who leads Europe’s biggest economy, faces her fiscally conservative voters this year.
The US-European split on stimulus is also symptomatic of a deeper challenge. For years, the United States has consumed more than it produced; Germany, Japan and China have done the opposite. It is in the interest of all of these countries, as well as being essential to global recovery, to begin to right that imbalance. But changing deep-seated patterns threatens entrenched interests and lobbies in every country.
