Published: 14 Oct 2011
Last Updated: 14 Oct 2011
Well, the good news is that the markets have shrugged off the decision by credit ratings agency Standard & Poor’s to downgrade its debt rating to AA-. In fact, the FTSE 100 rose 40 points, or 0.75% in mid-morning trading. Which will be a relief for G20 finance ministers, who are due to meet in Paris today and tomorrow, ostensibly to thrash out a solution to the eurozone crisis before G20 leaders meet in Cannes next month. What’s more likely, unfortunately, is a lot of squabbling as the US and emerging markets wade in on the argument…
The idea of the meeting is for the G20 countries to iron out disagreements and come up with one big resolution for the leaders to vote on in Cannes, so they can tuck into their organic Scottish salmon as quickly as possible. But with a crisis as severe as the eurozone debt crisis lingering over their heads, that’s unlikely.
One hope is that countries will manage to come up with a deal whereby emerging market economies (which are, to be fair, beginning to get increasingly smug about the eurozone situation) give the International Monetary Fund a helping hand by injecting some of their own cash into it. But there are reservations: former IMF board member Domenico Lombardi has suggested that the plan will only work if Europe consolidates its own bailout fund, the European Financial Stability Facility (we never tire of saying that). And no-one’s quite sure what the US thinks – while those close to the deal insist it’s keen, the US Treasury said this week that the fund already has ‘ample resources’. So who knows?
The other point about the meeting is that relations between the US and China are getting increasingly terse, after the US Senate passed a bill this week which would impose tariffs on imports from countries with undervalued currency. China, a country which needs a low currency to encourage all those exports, isn’t happy: in fact, it’s likened the move to the (also brilliantly-named) Smoot-Hawley tariff act of 1930, which sparked a global trade war and was ultimately blamed for making the Great Depression even more great. Not ideal, at the moment…
Despite all the in-fighting, though, the pressure’s on France and Germany to come up with a solution to all the eurozone’s problems before the Cannes meeting – indeed, the French finance ministry has already taken the opportunity to remind everyone that it’s an ‘absolute priority’. So fingers crossed that finance ministers will be able to set aside their differences before the end of the conference…
The idea of the meeting is for the G20 countries to iron out disagreements and come up with one big resolution for the leaders to vote on in Cannes, so they can tuck into their organic Scottish salmon as quickly as possible. But with a crisis as severe as the eurozone debt crisis lingering over their heads, that’s unlikely.
One hope is that countries will manage to come up with a deal whereby emerging market economies (which are, to be fair, beginning to get increasingly smug about the eurozone situation) give the International Monetary Fund a helping hand by injecting some of their own cash into it. But there are reservations: former IMF board member Domenico Lombardi has suggested that the plan will only work if Europe consolidates its own bailout fund, the European Financial Stability Facility (we never tire of saying that). And no-one’s quite sure what the US thinks – while those close to the deal insist it’s keen, the US Treasury said this week that the fund already has ‘ample resources’. So who knows?
The other point about the meeting is that relations between the US and China are getting increasingly terse, after the US Senate passed a bill this week which would impose tariffs on imports from countries with undervalued currency. China, a country which needs a low currency to encourage all those exports, isn’t happy: in fact, it’s likened the move to the (also brilliantly-named) Smoot-Hawley tariff act of 1930, which sparked a global trade war and was ultimately blamed for making the Great Depression even more great. Not ideal, at the moment…
Despite all the in-fighting, though, the pressure’s on France and Germany to come up with a solution to all the eurozone’s problems before the Cannes meeting – indeed, the French finance ministry has already taken the opportunity to remind everyone that it’s an ‘absolute priority’. So fingers crossed that finance ministers will be able to set aside their differences before the end of the conference…
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