PARIS/BERLIN: Germany, France and Britain announced plans on Tuesday, June 22 to introduce a bank levy to help meet the costs of the financial crisis, without waiting for a G20 summit this week, underscoring a rift with key partners.
A joint statement said the three biggest European economies were "committed to the full implementation of the ambitious G20 financial sector reform agenda," but the timing of the tax move suggested the Europeans have low hopes of any global deal.
G20 finance ministers dropped the idea of a common levy this month due to Canadian and Japanese resistance. But European Union leaders, under pressure to justify austerity measures to their voters, renewed a call for international action last week.
In the United States, lawmakers raced to finalise a wide-ranging rewrite of financial regulations for President Barack Obama to tout as a model for other countries at the G20 meeting. The overhaul does not include a bank levy, but Congress could act on the idea later this year.
US Treasury Secretary Timothy Geithner and White House economic adviser Lawrence Summers, writing in the Wall Street Journal, urged the G20 to work together to foster growth and not to jeopardise recovery by imposing austerity measures too quickly.
"We must demonstrate a commitment to reducing long-term deficits, but not at the price of short-term growth," the two wrote in a piece that will be published on Wednesday. "Without growth now, deficits will rise further and undermine future growth."
Britain's new centre-right government included a bank tax in Tuesday's austere emergency budget, aimed at slashing a giant deficit and swollen public debt built up rescuing teetering banks and fighting the deepest recession since World War II.
Finance minister George Osborne announced a two-year public sector pay freeze, a big increase in value-added tax on goods and services, a 25% cut in most ministries' spending over four years and measures to curb welfare costs.
The planned spending cuts were the toughest in a generation, prompting economist Howard Archer of IHS Global Insight to call it "a pretty eye-watering package".
On the other side of the globe, Japan announced ambitious targets to rein in its debt, with new Prime Minister Naoto Kan making clear the government would have to push through contentious tax increases to fill deep fiscal gaps.
Kan said the example of Greece, whose debt crisis has undermined confidence in the euro zone and forced other European states to adopt austerity measures, showed how markets had become more wary of public debt and sovereign risk.
Germany said it would put a bank tax bill to the cabinet in summer and France said it would present details of its bank levy in the 2011 budget, due to go to parliament in the autumn.
Canada, the G20's host, appeared to soften its stance on the bank levy on Tuesday. Finance Minister Jim Flaherty said in a newspaper interview: "I really want to see the G20 agree on how to go forward. It is important that we try to be collegial."
German victory?
German officials claimed victory even before leaders of the world's main industrialised and emerging powers meet in Toronto, saying the G20 was not demanding new stimulus measures and Berlin did not face censure for its planned austerity drive.
The United States has repeatedly urged "surplus countries" ' code for China and Germany ' to do more to boost domestic demand.
The issue of how to rebalance the global economy and restore post-crisis fiscal discipline without plunging the world into a double-dip slowdown will feature high on the G20 agenda.
"We can expect more sharp disagreements between the US and Europe, papered over with the common call for 'measures aimed at ensuring fiscal sustainability in a growth-enhancing way'," said Marco Annunziata, chief economist at UniCredit bank.
Beijing moved to defuse Washington's wrath on Saturday by announcing cautious moves to make its currency more flexible. But China is still unlikely to let the yuan appreciate nearly as fast as major trading partners would like.
World stocks fell for the first time in two weeks on Tuesday on a cooler assessment of the Chinese decision.
As if to underline the limits of the move, Beijing engineered a slight fall in the yuan exchange rate on Tuesday after allowing it to rise against the dollar at first.
Germany, Europe's largest economy, has defended plans to save around '80 billion over the next four years after US President Barack Obama preached patience in clamping down on public spending.
German officials said Obama did not press Chancellor Angela Merkel to ramp up stimulus spending in a recent telephone call.
"The exit from economic stimulus measures in 2011 is recognised as correct," one official said.
Merkel says Berlin has to pursue deficit reduction both because of a constitutional obligation and because it has Europe's fastest-ageing population. It also wants to set an example to the rest of the euro zone after Greece's debt crisis.
US and European officials say the global leadership forum, which began meeting at top level in late 2008 to bring rising powers such as China, India and Brazil into joint stewardship of the world economy, is proving unwieldy to manage.
The G20 has increasingly taken precedence over the Group of Eight industrialised powers as the main forum for international economic policy debate, but decisions are harder to take because of the larger membership.
"The question of the banking charge, for example, is going to be a test point from which it'll become clear whether the G20 is in a position to formulate interests jointly or whether it splits apart in two camps," one German official said.
However, on the bank levy issue, the main opposition comes from longstanding members of the G8, not the newcomers. ' Reuters
A joint statement said the three biggest European economies were "committed to the full implementation of the ambitious G20 financial sector reform agenda," but the timing of the tax move suggested the Europeans have low hopes of any global deal.
G20 finance ministers dropped the idea of a common levy this month due to Canadian and Japanese resistance. But European Union leaders, under pressure to justify austerity measures to their voters, renewed a call for international action last week.
In the United States, lawmakers raced to finalise a wide-ranging rewrite of financial regulations for President Barack Obama to tout as a model for other countries at the G20 meeting. The overhaul does not include a bank levy, but Congress could act on the idea later this year.
US Treasury Secretary Timothy Geithner and White House economic adviser Lawrence Summers, writing in the Wall Street Journal, urged the G20 to work together to foster growth and not to jeopardise recovery by imposing austerity measures too quickly.
"We must demonstrate a commitment to reducing long-term deficits, but not at the price of short-term growth," the two wrote in a piece that will be published on Wednesday. "Without growth now, deficits will rise further and undermine future growth."
Britain's new centre-right government included a bank tax in Tuesday's austere emergency budget, aimed at slashing a giant deficit and swollen public debt built up rescuing teetering banks and fighting the deepest recession since World War II.
Finance minister George Osborne announced a two-year public sector pay freeze, a big increase in value-added tax on goods and services, a 25% cut in most ministries' spending over four years and measures to curb welfare costs.
The planned spending cuts were the toughest in a generation, prompting economist Howard Archer of IHS Global Insight to call it "a pretty eye-watering package".
On the other side of the globe, Japan announced ambitious targets to rein in its debt, with new Prime Minister Naoto Kan making clear the government would have to push through contentious tax increases to fill deep fiscal gaps.
Kan said the example of Greece, whose debt crisis has undermined confidence in the euro zone and forced other European states to adopt austerity measures, showed how markets had become more wary of public debt and sovereign risk.
Germany said it would put a bank tax bill to the cabinet in summer and France said it would present details of its bank levy in the 2011 budget, due to go to parliament in the autumn.
Canada, the G20's host, appeared to soften its stance on the bank levy on Tuesday. Finance Minister Jim Flaherty said in a newspaper interview: "I really want to see the G20 agree on how to go forward. It is important that we try to be collegial."
German victory?
German officials claimed victory even before leaders of the world's main industrialised and emerging powers meet in Toronto, saying the G20 was not demanding new stimulus measures and Berlin did not face censure for its planned austerity drive.
The United States has repeatedly urged "surplus countries" ' code for China and Germany ' to do more to boost domestic demand.
The issue of how to rebalance the global economy and restore post-crisis fiscal discipline without plunging the world into a double-dip slowdown will feature high on the G20 agenda.
"We can expect more sharp disagreements between the US and Europe, papered over with the common call for 'measures aimed at ensuring fiscal sustainability in a growth-enhancing way'," said Marco Annunziata, chief economist at UniCredit bank.
Beijing moved to defuse Washington's wrath on Saturday by announcing cautious moves to make its currency more flexible. But China is still unlikely to let the yuan appreciate nearly as fast as major trading partners would like.
World stocks fell for the first time in two weeks on Tuesday on a cooler assessment of the Chinese decision.
As if to underline the limits of the move, Beijing engineered a slight fall in the yuan exchange rate on Tuesday after allowing it to rise against the dollar at first.
Germany, Europe's largest economy, has defended plans to save around '80 billion over the next four years after US President Barack Obama preached patience in clamping down on public spending.
German officials said Obama did not press Chancellor Angela Merkel to ramp up stimulus spending in a recent telephone call.
"The exit from economic stimulus measures in 2011 is recognised as correct," one official said.
Merkel says Berlin has to pursue deficit reduction both because of a constitutional obligation and because it has Europe's fastest-ageing population. It also wants to set an example to the rest of the euro zone after Greece's debt crisis.
US and European officials say the global leadership forum, which began meeting at top level in late 2008 to bring rising powers such as China, India and Brazil into joint stewardship of the world economy, is proving unwieldy to manage.
The G20 has increasingly taken precedence over the Group of Eight industrialised powers as the main forum for international economic policy debate, but decisions are harder to take because of the larger membership.
"The question of the banking charge, for example, is going to be a test point from which it'll become clear whether the G20 is in a position to formulate interests jointly or whether it splits apart in two camps," one German official said.
However, on the bank levy issue, the main opposition comes from longstanding members of the G8, not the newcomers. ' Reuters
No comments:
Post a Comment