Global banking levy – RIP. I have consistently argued that no one should get too excited about the idea because it will not happen. And now it has been consigned to the dustbin of history.
The G20 communique is pretty vague about the execution:
Policy makers perform U-turns only at times of no alternative. Though there was a lot of talk about growth here in Busan, South Korea, the big news was that the global community now thinks fiscal stimulus is yesterday’s idea.
All in all, it is pretty sobering stuff. Fiscal stimulus has been ditched, not because the G20 thinks the private sector is surging ahead in Europe, but because there is no other option.
As recently as April, the G20 communique concluded:
“In economies where growth is still highly dependent on policy support and consistent with sustainable public finances, it should be maintained until the recovery is firmly driven by the private sector and becomes more entrenched.”
But today, all talk of continued policy support until recovery is entrenched has disappeared and the tone is very different:
“The recent events highlight the importance of sustainable public finances and the need for our countries to put in place credible, growth-friendly measures, to deliver fiscal sustainability, differentiated for and tailored to national circumstances. Those countries with serious fiscal challenges need to accelerate the pace of consolidation. We welcome the recent announcements by some countries to reduce their deficits in 2010 and strengthen their fiscal frameworks and institutions”.
Although Britain, in particular, claimed credit for the change of tone and some deficit hawks such as Jean Claude Trichet, president of the European Central Bank, seemed genuinely pleased, many other ministers and officials worried that