Daily Archives: January 24, 2013

In London, the G20 has rather faded from view since Gordon Brown’s great event in Docklands in the spring of 2009, when a $1tn global stimulus was announced. (We await a final audit of this figure). It is hard to bring to mind any solid achievements to which it can claim credit since then. But in Davos, where Gs x & y are part of the currency of debate over breakfast, it is still alive and kicking. Indeed one reason why there is such a large Russian presence here is that Russia holds the presidency this year. They will be followed by the Australians in 2014. After digesting that recherché fact, who dare suggest that one does not learn interesting things in the Swiss mountains?

Another riveting factoid is that the G20 has spawned subsidiary creatures. There is the B20- a group of business leaders from the member countries, and indeed the L20, made up – you guessed it- of Labour unions from the same. Maybe there is a P20 composed of Professors (I would hate to discover that existed and I had not been invited), and even an H20 for journalists?

So what will the Russians do with their new toy? That was the topic of a long session full of Russians and Australians, and notably empty of Americans and Europeans. Both have always been suspicious of the G20, in which their influence has been notably reduced, by comparison with the precedent G7.

Kevin Rudd, the ex-prime minister, and ex-everything else in Australia, spoke well in support of the group’s achievements, though they were described as in the nature of: “Meaningfully moved forward the ongoing agenda on eliminating bad things and supporting really nice ones”. Amen to that. He argued strenuously for a new effort to revive the Doha round of trade talks, beginning with a new trade facilitation agreement, which he said would produce an immediate cost reduction of 10 per cent on trade of $22tn. One senses there must be some catch here. It sounded like one of those emails you get telling the lucky winner she has won the lottery, if only she first deposits a sizeable sum in an account in the Cayman Islands. Even Pascal Lamy, the WTO director-general sitting discreetly in the audience, looked a touch sceptical.

And it was downhill from there. A Chinese professor argued for a clear G20 statement in favour of nuclear power. I can just see Angela Merkel signing up to that. The International Labour Organization wanted new and tougher labour standards and a collective commitment to reduce unemployment. Others wanted the G20 to be an “advocacy organisation”. Advocating to itself, one presumes, as it is made up of governments.

The Russians listened to all this agenda-setting with polite indifference. For their part they showed some interest in pressing the US finally to agree to implement International Accounting Standards, which would indeed be a fine thing: the SEC has been stalling shamefully for years. Even that modest aim will cause big trouble with the absent hegemonic power. They also plan to have a look at dangerous trends in the deglobalisation of finance, as banks retreat to home base under regulatory pressure.

But it is hard to see any game-changing moves in prospect. The G20 seems condemned to drift along, unloved and unremarked, until the next crisis, when world leaders will no doubt touch a different G-spot in search of instant gratification.

David Cameron’s speech on Europe was predominantly tactical. So, too, are the reactions from Berlin and Paris. But the British prime minister’s speech raises questions of broad significance for the whole of the EU. Should it be redefined as a permanently two-level edifice? And if so, how?

These are not new questions. In fact they were raised two decades ago when Britain, and later Sweden, decided against joining the European Monetary Union. They were discussed later in the 1990s in the context of EU enlargement, until it became clear that eastern Europeans had no appetite for second-class citizenship. And they were put back on the agenda when it was realised that eurozone members had to integrate further, because a viable currency required more than a common central bank and a set of fiscal rules.

The EU’s response has so far been to act as if all members shared the same goal but were travelling at different speeds. So the euro is legally the currency of the whole EU, but some members benefit from “derogations” and can issue their national currency. In the same way, the prevention of excessive deficits applies in principle to all EU countries, but strong enforcement tools can only be used with eurozone members.

This unity has become a fiction. A set of rules, institutions and instruments is being built for the current and future participants in the euro. These involve a mutual assistance fund, revamped fiscal discipline rules, and a common supervision and resolution regime for banks. There are talks of a specific eurozone budget, or at least of a common “fiscal capacity”, and of financial support for reform efforts. Further steps could include joint external representation in international forums. This endeavour raises issues of political legitimacy, which will need to be solved one way or another.

So, an “EU-plus” is in the making.

But if an EU-plus is being built, why not an EU-minus, as Mr Cameron suggests? If the euro members strive to define how much integration they need to make their currency union effective and resilient, why not ask how much integration is needed to ensure the effectiveness and resilience of what Britain regards as the key reason for participating in the EU, namely the single market? If the goal is to stop there, why not strip out some EU rules or policies that are merely intended to pave the way to further steps of integration?

The question is what this could mean concretely. The PM’s speech is remarkably short of specifics. He refers to the treaty provision committing EU members to an “ever closer union”, suggesting that the UK should be freed from it. This would be of limited consequence: whoever thought that Britain was really bound by this commitment was the victim of a dangerous optical illusion.

So what could Mr Cameron hope to strip out? Labour regulations are repeatedly mentioned by British critics of the EU. But regulations on health and safety, equality in the workplace or working time are not there to pave the way for an ever closer union, rather because, together with product and environmental regulations, they are considered an integral part of the single market. So the question here is not whether to limit integration to what is needed for an effective single market. Rather, the dispute is what an effective single market must encompass. Britain’s partners have strong views in this respect and they are unlikely to concede to British demands.

Finally the UK government is concerned by EU financial services legislation. It is a very natural concern that stems from London’s status as the offshore financial centre of the eurozone. How to avoid mission creep in the operation of supervision and resolution at eurozone level and how to avoid the eurozone turning into a caucus that would command an automatic majority of financial regulation matters are real issues and both sides must agree on principles to deal with them. But again, the forming of an EU-minus union around the single market would not solve any of these problems.

Another prime candidate for reform would be the EU budget. The problem with the budget, however, is not that it is too big (it amounts to a little less than 1 per cent of EU gross domestic product) or too integrationist. It is that it is a relic of the late 20th century that does not correspond to today’s policy priorities. It is not a matter for dispute between pro-Europeans and eurosceptics, but between the advocates of change and those with a vested interest in the status quo.

So it is to be hoped that the predominance of tactics will not prevent discussion on the issues raised in Mr Cameron’s speech. But it is not certain that this will do much to alleviate British angst over Europe.

The A-List

About this blog Blog guide
Welcome. This blog is available to subscribers only.

The A-List from the Financial Times provides timely, insightful comment on the topics that matter, from globally renowned leaders, policymakers and commentators.

Read the A-List author biographies

Subscribe to the RSS feed

To comment, please register for free with FT.com and read our policy on submitting comments.

All posts are published in UK time.

See the full list of FT blogs.

What we’re writing about

Afghanistan Asia maritime tensions carbon central banks China climate change Crimea emerging markets energy EU European Central Bank George Osborne global economy inflation Japan Pakistan quantitative easing Russia Rwanda security surveillance Syria technology terrorism UK Budget UK economy Ukraine unemployment US US Federal Reserve US jobs Vladimir Putin


Africa America Asia Britain Business China Davos Europe Finance Foreign Policy Global Economy Latin America Markets Middle East Syria World


« Dec Feb »January 2013