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Date: 2024-05-21 Page is: DBtxt001.php txt00000562

Global Economics
The emerging financial crisis in Europe

Cameron signs G20 economy recovery plan that will be basis for discussion at G20 in Cannes

Commentary
This text is quite depressing ... the problem is huge, but the methodology to fix the crisis is unbelievably archaic and wrong-headed.

One of the issues is that bankers are still taking unacceptable risks and making large salaries and bonuses in the process, and worse is the fact that the accountancy profession has completely abdicated its role and, in my view, responsibility to force economic actors to produce financial reports that are 'true and fair' and tell the reader what is going on and what state the organization is in. The lack of reliable information from the actors in the banking sector is a dangerous disgrace, and not made any more comfortable by the disclosure that a rogue trader at one of the Swiss Banks operating in London was able to lose some $2.5 billion of the bank's money without the bank knowing. What foolishness is this? Is everyone asleep at the wheel?

Another issue is that the capitalist market economy is only interested in profit and growth. This business and economic model was fine in an era when there was global shortage in supply of goods and services ... that is during the agricultural revolution and the early days of the subsequent industrial revolution ... but is a ridiculous model for a society where productivity is amazing and there is a surplus of goods and services. While there is productivity and surplus of goods and services for those with buying power, there are two issues (1) there are billions of people who have needs but not much buying power and (2) there are finite limits to the material resources that are needed to feed the production processes. All of this suggests that a better model is needed than the prevailing capitalist market economy with profit and GDP growth as drivers. What is needed is a business and economic model that has value add more important than profit and progress in quality of life more important than GDP growth ... in other words a value market economy.

None of this seems to be understood by the people who will be at Cannes, nor among the people engaged in advising not those who engage in the conversation in the media.
Peter Burgess

Cameron signs G20 economy recovery plan

Britain today joined forces with five other G20 countries to call for decisive and coordinated action from the world's leading nations to help the global economy recover from recession.

Prime Minister David Cameron put his name to a letter to current G20 president France - also signed by the leaders of Australia, Canada, Indonesia, Mexico and South Korea - warning that the path out of recession will be 'difficult' and arguing that the world's biggest economies must agree at the Cannes Summit in November to work together to increase global demand without creating unsustainable imbalances.

The six signatories, who do not include the US or any eurozone state, urged swift action to resolve the debt crisis in the single currency area and for measures from Washington to put America's public finances on a sustainable path.

South Africa was involved in discussions about the letter and is understood to share many of the concerns voiced in it, but decided at a late stage that it was not ready to sign up.

'For many advanced economies the path out of the deep and prolonged recession will be difficult,' warned the letter, addressed to French President Nicolas Sarkozy.

'This will impact on growth in emerging markets, and there is more limited room for manoeuvre than in 2009.'

Mr Sarkozy said yesterday that the Cannes Summit should be used to help the world find a path back to economic growth.

Today's letter backed his call and argued that this will require G20 leaders to act together in a coordinated way to address the issues which relate to their own countries - whether in reducing debt, tackling trade imbalances or strengthening banking systems.

Barriers to progress on restoring growth are now political as much as economic, said the letter.

Cannes will provide an opportunity for G20 members - who together represent 85% of the world economy - to 'commit to each other to take the actions we know are necessary'.

Three years after the G20 leaders first met to discuss the global financial crisis in 2008, its 'reverberations' are still being felt around the world, said the letter.

'We need decisive action to support growth, confidence, and credibility,' the signatories warned.

'We have not yet mastered the challenges of the crisis. Global imbalances are rising again. External risks to the stability of our banks and our economies are reaching pre-crisis levels. And volatile and high energy prices are hurting our citizens and acting as a drain on world growth.

'At the same time, the confidence of citizens, businesses, and markets has been damaged due to the lack of visible political will: this in itself is holding back the recovery.'

In a plea for a return to the kind of coordinated action seen at the height of the crisis in 2008/09, they warned: 'Only when we work together can we restore strong growth and the confidence on which it depends.'

The letter called for eurozone governments and institutions to 'act swiftly to resolve the euro crisis' by tackling debt and swiftly ratifying the bailout mechanism agreed in July.

And it called on the US and other high-deficit advanced economies, to 'overcome the remaining hurdles towards restoring medium-term fiscal sustainability'.

'Countries with long-term debt problems must put in place and implement credible growth-friendly medium-term fiscal consolidation plans, differentiated according to each country's own national circumstances,' said the letter.

Meanwhile, it urged countries with large trade surpluses - such as China - to expand domestic demand, keep their markets open, increase exchange rate flexibility and refrain from competitive devaluation.

And it called for the completion of the Doha talks on trade liberalisation, which have dragged on for more than a decade. If a 'credible plan' to conclude Doha cannot be reached at Cannes, G20 nations should move to alternative approaches for strengthening the multilateral trade system.

'The barriers to action are now political as much as economic,' said the letter, released ahead of a meeting of G20 finance ministers in Washington DC this weekend.

'We must send a clear signal that we are ready to take the actions necessary to maintain growth and stability for all for the future.

'The G20 showed at the height of the global financial crisis that we could work together to deal with global instability - the Cannes Summit is an opportunity for leaders to prove this, arrest the slide in confidence, and strengthen the foundations for strong, sustainable, and balanced global growth for the future.'


By Andrew Woodcock
Thursday, 22 September 2011
The text being discussed is available at http://www.independent.co.uk/news/uk/politics/cameron-signs-g20-economy-recovery-plan-2359116.html
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