大象传媒

bbc.co.uk Navigation

Passing the hat

  • Stephanie Flanders
  • 12 Mar 09, 12:19 PM GMT

You can take them to the Summit but you can't make them jump. Gordon Brown's worst nightmare would be for G20 leaders to come to London next month and agree to not very much at all. That's still possible. But thanks to the US Treasury Secretary, Tim Geithner, we might at least get a juicy row.

Tim GeithnerYesterday Tim Geithner finally unveiled his wish-list for the , which he will be pushing hard at this weekend's of finance ministers and central bank governors in Sussex. He has, in the phrase beloved of US Treasury officials 'committed substance'. There's the usual boilerplate about 're-affirming commitments to' and 'strengthening cooperation against'. But there are also some real policy proposals - proposals with which (speak it softly) other parts of the G20 will not agree.

The International Monetary Fund is front and centre of these plans: that in itself marks a break with the past. US administrations have usually regarded the Fund with distrust - even while they were attempting to dictate its every move. Geithner wants to give it more firepower than even the Fund itself had called for.

As I have noted elsewhere, the Fund's Executive Board have asked for an extra $250bn to help emerging economies in trouble. But the US Treasury Secretary wants to give it an extra $500bn, by expanding the New Arrangements to Borrow, or NAB, a standing facility the IMF has to borrow from 26 economies, which now stands at only $50bn. He would even put the first $100bn in the pot himself (that sounds more generous than it is - for arcane reasons, as far as the Federal budget bean-counters are concerned, it wouldn't cost the US a dime).

This is music to the ears of British officials, who've spent months persuading the Americans of the case for more IMF cash. Now the US proposal is out there, the Summiteers can get on with the job of passing the hat.

Geithner said he would like to expand the list of lenders to include more of the G20. If you're listening, China, that means especially you. But if big emerging market economies are going to cough up more money to save the world, they will want a greater say in how that world is run - or failing that, at least the IMF. Right now China has less than 4% of the votes in the Fund, only slightly more than Switzerland. One question for the London Summit is how much the rich economies will have to loosen their grip on the international institutions to get the emerging economies to come along.

Among the rich economies, Japan has already agreed to lend the IMF an extra $100bn. It's unlikely to be asked to give any more. The big surplus economy that hasn't coughed up is Germany. With an election later this year, the Germans are shaping up to be the biggest potential spoilers of Gordon Brown's party.

Germany has never been a big fan of the IMF, although it likes the fact that the IMF puts tough conditions on its cash (unlike some). It's possible Chancellor Merkel and her EU colleagues will agree to put more into the pot. After all, as I've noted previously, it's in their own interest: nearly all of the countries likely to need help from the Fund in the next year or so are in Central and Eastern Europe. But after America's efforts this week to shame other economies into bigger stimulus packages, the Europeans may not be in the mood for a deal.

Larry Summers, President Obama's key economic advisor, beat the drum for more fiscal stimulus by other G20 governments in an with the Financial Times. Geithner followed this up yesterday with a number: he said that the 2% of global GDP stimulus called for by the IMF in 2009 and 2010 was a "reasonable benchmark", and he wants the IMF to report quarterly on government's efforts to get economic growth back to potential. He stopped short of insisting everyone sign up to 2%, but to cite that as a benchmark was inflammatory, because it threatens to open up a whole debate about burden-sharing at the Summit which the Europeans would rather not have.

The IMF reckons that between them the are implementing about $700bn in economic stimulus in 2009, which is about 1.4% of their GDP and just over 1% of the world's. Three countries - US, China and Japan - account for nearly two thirds of that total. The picture for 2010 is even more skewed, with the US accounting for 60% of the stimulus currently in train. By then, the IMF reckons there will be little, if any, extra stimulus operating in the UK. The additional stimulus in France will be just 0.7% in 2009 and 2010.

If the global economy is tanking, you might think it obvious that governments should do as much as their budget position will allow. And most economists would say that France and Germany could afford to do more. But of course it's not that simple. For one thing, all the US talk of 'discretionary' stimulus packages leaves out all the stimulus that happens naturally as a result of a recession - like extra spending on unemployment benefits. Thanks to their larger welfare states, we know these automatic stabilisers are much larger in Europe than the US.

In fact, if you look at what's happening to the overall fiscal balance, the US isn't doing that much more than other countries. The deterioration in the German budget is going to be almost as large as America's, though of course Germany's entered the crisis in a stronger state.

The Americans accept some of this. They might even accept that they are going to have to have further stimulus packages if the recession turns out to be more prolonged. But Geithner's focus on the IMF and its analysis has put an uncomfortable weight on the institution's fiscal economists.

It is these hapless souls who have to work out what is and is not a stimulus in every country and estimate the global effect. These days, they are finding a lot of unwelcome diplomatic energy is being directed their way. There are other issues on the G20 agenda which I'll write about in the coming days. But Larry Summers used to joke that the IMF stood for It's Mostly Fiscal. Right now, it mostly is.

The 大象传媒 is not responsible for the content of external internet sites

大象传媒.co.uk