This week, world finance chiefs will make their most concerted effort to redefine the world economic order of the era after Donald Trump and the coronavirus pandemic.
As trade tensions no longer affect the Group of 20 economies in the way they did during the term of the former U.S. president, the first face-to-face meeting of their finance ministers since the disease occurred on last year will try to forge a consensus on outstanding issues ranging from climate change to corporate taxation.
Alongside these issues, the July 9-10 meeting is likely to take stock of an incomplete global recovery, overshadowed by the persistent threat of setbacks from new coronavirus variants. This may focus minds on the need for continued fiscal efforts to support growth, amid growing concerns about inflation and oil prices that remain high after this week’s breakdown in OPEC + talks.
“Global economies are working together again,” said Rosamaria Bitetti, an economist at Luiss University in Rome. “This is a great opportunity for the G-20 to think about how this pandemic showed that in our interconnected world, issues are global and need to be addressed together, leaving nationalism behind.”
With Italy hosting the meeting in Venice as chair of the group, the symbolism of convening in a former cross-continent trade center will not be lost on participants. They can also look up the name of the opera cursed by the city’s fire: The Phoenix or the Phoenix, to be inspired by what to strive for in the embers of an unprecedented global crisis.
The risk is that the scars of discord that chased international meetings during the Trump years may persist, including echoes of his frequent suspicion about China.
For Bruno Le Maire, the French finance minister, the responsibility now lies in building the consensus reached during the early stages of the pandemic.
“The G-20 must show Venice that it can still fulfill its responsibilities and be able to give concrete, new and radical answers to the challenges of the future, in a continuation of what it has managed to do since February 2020,” he said. to reporters on Tuesday.
Here are some of the areas for discussion:
Tax Aids
Heads of finance are likely to discuss ongoing efforts to combat the economic impact of the pandemic, a dialogue that may include both the need for continued government support and the outlook for inflation.
U.S. Treasury officials told reporters Tuesday that Secretary Janet Yellen will urge other countries not to prematurely withdraw COVID-related tax measures. It will also encourage long-term reflection on increased economic growth, noting President Joe Biden’s proposals for infrastructure spending, labor support and green investments.
This emphasis also indicates that, at least for U.S. officials, keeping the economic recovery on track is still more urgent than fears of inflation. The same goes for Europe, with countries wary of eliminating generous incentives too soon and the European Central Bank minimizing price fears.
Uneven growth
Countries will also discuss ways to avoid excessive divergences between economies, as concerns about the impact of new virus strains on recovery increase.
Even in Europe, the rebound is “highly uneven,” according to the European Commission, which this week predicted that Germany and the Netherlands would reach pre-crisis production levels a full year ahead of Italy and Spain. This phenomenon is developing all over the world, which augurs for disparities between countries and regions.
“The world is facing a worsening of the two-way recovery,” IMF Managing Director Kristalina Georgieva said in a blog post on Wednesday. “It is a critical moment that calls for urgent action by the G-20.”
Climate change
The G-20 has long struggled to agree on how to combat climate change, and this meeting, in a city more vulnerable than most to rising sea levels, is likely to have more debate.
In a lecture Sunday at an independent conference on climate change, Yellen could reiterate the U.S. view that ordering private funding will be crucial to tackling the problem.
Under Biden, the United States is stepping up European efforts to prepare a system to require companies to disclose more information about how climate change threatens their operations. Climate-related financial disclosures can be a topic discussed at both the G-20 and the subsequent conference.
Corporation tax
Ministers will approve a global agreement between 131 countries brokered by the Organization for Economic Co-operation and Development that proposes a minimum corporate tax of at least 15% and new rules to split the tax revenues of the largest companies in the world. world.
While talks are expected to continue until October, when G-20 leaders meet in Rome, a preliminary gesture in Venice would mark another important step toward reforming the global fiscal landscape.
Negotiations could still be bogged down by disagreements, such as how much tax revenue should be redistributed to developing economies and whether countries will meet the U.S. demand to withdraw digital taxes once new global rules are established.
IMF resources
Special collection rights, known as SDRs, will also be some of the topics, as the International Monetary Fund prepares the largest resource injection in its history to help increase global liquidity and help emerging and low-income nations. income to cope with rising debt.
France is pushing for rich countries to lend their new SDRs again so that Africa will eventually receive a total of $ 100 billion. To achieve this goal, the IMF will have to find an effective mechanism and countries beyond the Group of Seven will have to participate.
