ISTANBUL: The world’s top 20 economies on Tuesday agreed to take steps to promote global growth but struggled to overcome rifts over the most suitable tools to use and how best to overcome the Greek debt crisis.
G20 finance ministers and central bank chiefs meeting in Istanbul said that growth in the global economy remains “uneven” and the recovery “slow”, especially in the Eurozone and Japan as well as some emerging market economies.
They also warned of the risk of “persistent stagnation” in some leading economies due to “prolonged low inflation alongside sluggish growth.”
“We are determined to overcome these challenges” to deliver sustainable growth that can create jobs and encourage inclusiveness, a key target of the Turkish G20 presidency, they vowed in their draft communique.
The G20 states said the recent sharp decline in oil prices will provide “some boost” to global growth and should allow states to “reassess” fiscal policies to sustain economic activity.
It said that fiscal policy “has an essential role” in building confidence and sustaining domestic demand, in a prod to some states to drop their insistence on austerity.
However there were indications of tensions that some states — notably fiscal hawk Germany — were unwilling to relax fiscal policy enough to boost demand.
A senior US treasury official, who asked not to be named, said Washington wanted to see countries use all the tools at their disposal — including fiscal policy — to boost growth.
The official said that the current strong performance of the US economy was positive and it would be good to see similar growth levels in other areas like the Eurozone and Japan.
The G20 communique said that while the sharp oil price falls will provide some boost to global growth, the implications will be different for oil exporting and oil importing countries.
The outlook for oil prices remains “uncertain”, it added.
“We will continue to closely monitor developments in commodity markets and their impact on the global economy.”
Tensions on Greek debt
The statement did not specifically mention Greece, which is not a member of the G20. But the Greek debt crisis has been at the centre of all bilateral talks in Istanbul ahead of a crunch meeting of Eurozone finance ministers this week.
Greece faces a growing risk of a “miscalculation or misstep” that could spark a “very bad outcome” to the nation’s debt crisis, British Finance Minister George Osborne warned on Tuesday in an interview with Bloomberg Television in Istanbul.
German Finance Minister Wolfgang Schaeuble said earlier that Greece needs to agree a full programme with its creditors if it wants to secure European financial help for its debt crisis, keeping up Berlin’s tough line.
“I still don’t understand how they [Greece] want to do it,” he said.
But the senior US treasury official appeared to suggest that Greece should be allowed some leeway, calling for a practical solution that would not cause instability either in Greece or Europe.
“There is enough going on in the world right now ... This conversation (to solve the crisis) needs to happen in a period of time to avoid any additional uncertainty,” the official said.
‘Fight terror financing’
Amid the onslaught in Iraq and Syria by well-financed Islamic State (IS) jihadists, the G20 also committed to “deepen our cooperation” in the fight against terrorism financing.
This would be done by exchanging information and “freezing terrorist assets”.
The communique urged “all countries to speed-up their compliance with the relevant international standards” in this respect.
It said the Financial Action Task Force (FATF) against money laundering and similar bodies should “put a specific focus on financing of terrorism”.
They should also develop guidelines to improve the transparency of payment systems, in order to lessen the risk they are used for the financing of terrorism and money laundering, it said.
The G20 asked for a report by October on “proposals to strengthen all counter terrorism financing tools.”