World Markets Dip Ahead of Crucial G20 Meeting
by Hiland Doolittle
G20 This Weekend – Financial Markets Await
At the Group of 20 meeting in November 2008, new and aging national economies came together just long enough to agree on two key points; to work together to manage problems with the global recession and to jointly arrive at solutions designed to safeguard against the causes. Since that meeting, the recession has deepened in almost all corners of the globe and international survival has succumbed to national remedies.
At this weekend’s meeting of the G20 financial ministers, there will most certainly be 20 varying ideas about how to solve the global recession. At a time when marketplaces need to know the magnitude and direction of the G20’s monetary and policy commitments, all eyes will turn to England.
Although the U.S. markets embraced Citigroup’s profitability statement issued early in the week, international markets tumbled deeper. Japan’s Nikkei 225 fell 2.4%, as Britain’s FTSE 100 fell 1.7% and Germany’s DAX was trimmed by 2.1% and France’s CAC-40 shaved 1.9%.
Japan’s adjusted 4th quarter economic figures reflected the country’s biggest downturn in 35 years. Even as the U.S. markets rose, trouble loomed on the horizon as more than 650,000 Americans filed for unemployment last week and retail sales showed a dramatic decrease.
Stephen Lewis, an analyst for London’s Monument Securities summed up the G20 meeting:
There seems little hope, then, that the participants will make progress and the chance is greater that international frictions will break out into the open. This would add to the sense of despair in financial markets
For many of the G20 member economies, there is not room for added despair.
Germany’s Finance Minister, Peer Steinbrueck said:
I am seeing signs that the Americans are moving toward regulation and also that Gordon Brown is considering regulation
Steinbrueck indicated that this weekend’s meeting needed to set the stage for action when the G20 have extended meetings next month.
Behind the Scenes Before the G20
UPDATE 2-France, Germany reject US push for more spending
G20 nations have all supported some derivative of a stimulus package for their ailing economies. Many of the European countries blame the U.S. and England for loose banking policies that have contributed greatly to the recession. The European Central Union, whose economies are stagnant, has adamantly declined to increase their pre-announced contributions to increase the International Monetary Fund.
Britain and the U.S. have supported increasing the IMF, increasing the contributions from $250 billion to $500 billion. Japan set the early stage for the increase by announcing a $100 billion commitment last month.
China and Saudi Arabia have both withheld any increases and are lobbying for revised G20 voting powers reflective of a nation’s contribution at this critical time. G20 talks to reach more open trade agreements have stalled. In fact, many European nations have raised the duty on certain imported goods.
The U.S. and Britain have engaged in quantitative easing to assist certain financial institutions and corporations. Many international financial ministers view these investments with skepticism.
Since the November meeting in Washington, several steps have been enacted. Accounting standards have been reviewed as well as CEO compensation packages, credit rating policies and bankruptcy regulations. Meanwhile, global supervision of banks and clearing of credit default swaps have also been scrutinized.
Geithner Pushes Hard
U.S. Secretary of the Treasury is in the news more than he would like to be. The beleaguered Secretary continues making headlines with bold pronouncements. Regarding the upcoming G20 meeting which will set the stage for policy meetings on April 2, 2009, Geithner is pushing for a substantial increase to the IMF. The world’s major exporters support such a move but other member nations prefer to let their money work at home.
Markets have been uneasy with the increased scrutiny and mixed messages resulting from the November G20 meeting. Geithner has sent a message that the U.S. and Britain have concentrated and invested in resolving their regulatory issues. The Secretary is determined to focus on growing the world’s struggling economies.
Members like Germany’s Steinbrueck seem inclined to take a more patient stance:
In Germany, we have already delivered a decisive response to the crisis with our twin stimulus programs. We should now give the measures the necessary time so that they can show their effect
Geithner and the Obama administration take a dim view of the wait and see approach. The current administration is faced with ever-increasing unemployment and declining consumer confidence. The U.S. needs job growth and manufacturing increases to stem the tide. Standing still is not an option.
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Tags: britain, financial markets, financial ministers, g20, us, world markets
About the Author - Hiland Doolittle
Hiland is a professional writer with extensive entrepreneurial experience. He is a graduate of St. George’s School Newport, RI and the State University of New York at Albany where he majored in history. He has been active in the real estate business for 30 years and has founded and sold several businesses.
Hiland currently writes for several financial sites and is a published author of the novel The Last Parade. He has recently completed a manuscript for a children’s book entitled Sami and The Minnow Man.
