The big day dawns in a fog of confusion and press reports of rifts between continental Europe and the Anglo Saxons, following what were portrayed as rival press conferences by Obama and Brown in one part of London, and Sarkozy and Merkel in another. Today will show how much of this was just playing to the domestic gallery – Sarkozy may just want to look tough in the French press. But what is happening on the issues that matter for developing countries? Here’s a quick round up of what we are hearing through a range of sources (some of whom are undoubtedly spinning an overly optimistic/pessimistic line to us, so all of this should be taken with a pinch of salt!):
Bailing out the poor: Oxfam is calling for a $580bn package for developing countries, including $25-41bn for the poorest (compared to their GDP, that constitutes a fiscal stimulus of similar magnitude to that in the rich countries). It looks like there will be a combination of money announced flowing through the IMF and World Bank. There may be some announcements on funding for the World Bank’s new Vulnerability Fund, with Germany and the US joining Britain as donors. But the key question here is whether any of this is new money, or merely repackaged existing aid (our information is that there is much more of the latter)? The IMF could get the OK to issue some $90bn of ‘special drawing rights’ (in effect an international currency) for developing countries (out of a total of $250bn for all countries). Of this, perhaps $19bn would be made available to low income countries. More money could have come for low income countries from the IMF selling some of its 3,000 tonnes of gold, something that featured in the leaked communiqué over the weekend, but there is now doubt on this, as the IMF is reportedly opposed.
Reforming the international institutions: If new (or old) money is pumped into the IMF and World Bank without a comprehensive reform of their structures and policies, they could continue to impose some of the mistaken policies that caused such harm in the 1980s (structural adjustment) or after the Asia crisis of the late 1990s (procyclical spending cuts in a downturn). Given the urgency of developing country needs, we accept that money should not wait until such reforms are completed, but there has to be a credible commitment on scope and timetable of reform. That does not seem to be on the table at the moment – a few existing commitments are repeated (eg electing the heads of the World Bank and IMF on merit), but everything else looks like it will be kicked into the IMF/World Bank Spring Meetings in Istanbul at the end of April. That’s worrying.
Tax Havens: A lot of hard bargaining going on over these jurisdictions for handling what is effectively stolen property, and we’re hearing all sorts of contradictory messages. Sticking points include whether they will publish a ‘black list’ of bad guys now, or merely threaten to do so and whether sanctions will be imposed, or merely threatened, against non-compliers. What seems to have been ruled out is a commitment to a multilateral system, rather than just a series of bilateral agreements. Also off the table is automatic information exchange between tax authorities, which is potentially disastrous – without automatic exchange, countries will need to know in advance what they are looking for (account numbers and so on) before they can ask each other for information, and under the weaker forms of a deal, countries can then refuse to answer! (This is currently the case with many tax information exchange agreements) Without both a multilateral system, and automatic information exchange that applies to companies and trusts, as well as individuals, any tax haven commitment could be of little benefit for developing countries, which currently lose as much capital every year to tax havens as they receive in aid.
Green New Deal: This was the worst aspect of the FT’s version of the draft communiqué (see my analysis here). We are being told that China is the most hostile, perhaps because it fears possible ‘green protectionism’ being used against its exports. In any case, the language is likely to be weak, with no commitment to a carbon audit of countries’ fiscal stimuli. The optimistic view (put out by the German government) is that the next G20 summit, which will be held just before the big Copenhagen climate change conference in December, will major on climate change. The pessimistic view is that this is a massive missed opportunity, and the host at the next G20 is likely to be less committed to the issue (at least in terms of diplomacy) than the UK. I go with the pessimists.
So, it’s off to the Excel Centre to see whether our leaders can give us a pleasant surprise!