Should the G-20 save the euro?
Former British prime minister Gordon Brown is echoing recent calls by Labour Party leader Ed Miliband to bring together the G-20 leaders: The G-20, which represents 80% of world output, came into its own in 2009 as the only multilateral body able to coordinate global economic policy. Unfortunately, its member states soon abandoned that goal ...
Former British prime minister Gordon Brown is echoing recent calls by Labour Party leader Ed Miliband to bring together the G-20 leaders:
Former British prime minister Gordon Brown is echoing recent calls by Labour Party leader Ed Miliband to bring together the G-20 leaders:
The G-20, which represents 80% of world output, came into its own in 2009 as the only multilateral body able to coordinate global economic policy. Unfortunately, its member states soon abandoned that goal and defaulted to national solutions. Predictably, going it alone has proven futile in ensuring economic recovery. The G-20’s time has come again. The sooner French President Nicolas Sarkozy calls the G-20 together to act, the better.
It’s hard to imagine, as Brown implies, that the impediment to a dramatic G-20 summit is Sarkozy. My sense is that neither the United States nor China see much point in convening an emergency summit without a clear sense of what it will accomplish. In today’s Financial Times, Barry Eichengreen, Peter Allen, and Gary Evans offer up a a very concrete task for the group—saving the euro:
[A] facility financed by the G20 and led by the Asian countries, which are flush with funds, should be created to purchase preferred shares in European banks. Asian countries should want to do this: their own stability hinges on the stability of the world economy, of which Europe is a critical part. Moreover, if Europe, with their help, succeeds in drawing a line under its crisis, those preferred shares will be a highly profitable investment. In addition, the G20 should expand the network of central bank swaps. Eurozone banks depend on dollar funding, which the European Central Bank cannot provide.
For all the attention that the race for the new IMF head received, the solution that the authors propose would mark a much more dramatic change in the power structure of that institution. If the emerging powers largely fund a new facility to save the euro, they will acquire a degree of practical and moral ownership of the IMF much greater than they would have acquired by naming a new managing director.
David Bosco is a professor at Indiana University’s Hamilton Lugar School of Global and International Studies. He is the author of The Poseidon Project: The Struggle to Govern the World’s Oceans. Twitter: @multilateralist
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