The New Stars of Cannes

Some surprising economies are hogging the spotlight at this year's G-20 summit.


The flashbulbs are going off in Cannes again, but it’s not the usual collection of celebrities. Nevermind that it’s flabby finance ministers instead of toned movie stars, the interesting thing about this year’s Group of 20 summit of the world’s most powerful economies is that the traditional powers find themselves elbowed from the spotlight and, in some cases, begging for a little help.

This week’s meeting — which kicked off today under the shadow of the European debt crisis — finds some major economies significantly hobbled, while others are emboldened by unexpected upswings. Argentina and Turkey are unexpected heavyweights as their economies surge, while traditional international players such as the United States and Japan are too concerned by domestic problems to decisively step in and stem the financial turmoil in Europe. China and Brazil may be experiencing some uncharacteristic economic difficulties, but they’ll be playing more critical roles in the summit than ever before.

To be sure, the developed nations of Europe and America still account for half of global GDP, and wield considerable geopolitical might. But, as AFP‘s Hugues Honore points out, this year’s G-20 could very well mark a turning point. “The giant emerging economies of Asia and Latin America could stake a historic claim to global economic power if they arrive at the G-20 summit in Cannes with offers of aid for hobbled Europe,” he argues. Let’s catch up with how 10 key members of the G-20 are faring in today’s uncertain economic climate.

Above, U.S. President Barack Obama and French President Nicolas Sarkozy head to a bilateral meeting in Cannes on Thursday.

Philippe Wojazer/AFP/Getty Images


GDP growth: 9.5 percent

Unemployment rate: 9.4 percent (2008)

Upside: China is the world’s second-largest economy and, as the Financial Times puts it, the “main source of optimism in the global economy.” It has over $3 trillion in foreign exchange reserves and its appetite for raw materials fuels the growth of countries like Indonesia and Brazil.

Downside: The debt crisis could take a toll on China’s economy, since Europe is its biggest export market. Chinese officials are also trying to engineer a so-called “soft landing” by slowing growth to control inflation (the Chinese economy grew at its slowest pace in more than two years in the third quarter). As the Associated Press explains, “The big question is whether the world’s economic superstar will shrink gradually — or so fast that it harms a fragile global economy.”

G-20: It’s the Chinese — not the Americans — who might prove to be the heroes of the G-20 by investing in Europe’s rescue fund. But Chinese officials are wary of doing so because a significant portion of the Chinese public doesn’t believe it’s a good investment.

Above, a man in Hong Kong walks past a display of the Hang Seng Index, which dropped on Tuesday over concerns about Europe’s debt crisis and weak manufacturing data from China.

Aaron Tam/AFP/Getty Images


GDP growth: 1.7 percent

Unemployment rate: 9.1 percent

Upside: The United States is still, by almost any measure, the world’s largest economy. And there are bright spots in its recovery from the 2008 recession. Consumer spending and economic growth are picking up, and inflation appears to be under control.

Downside: The United States is plagued by sluggish economic growth and stubbornly high unemployment, not to mention dangerously vulnerable to financial turmoil in Europe. 

G-20: President Obama declared today that resolving the European financial crisis is “the most important aspect of our task over the next two days.” But while Obama has been a key player at previous G-20 summits, it’s unclear what help — if any — the U.S. can provide. “The president will need to tread carefully, given that the United States is struggling to fix its own fiscal problems and has limited means to intervene in Europe even if it wanted to,” Reuters explains.

Above, protesters march as part of Occupy Chicago in October.

Scott Olson/Getty Images  


GDP growth: 8.2 percent

Unemployment rate: 7.3 percent

Upside: We hear a lot about Brazil’s economic clout, but Argentina is growing twice as fast as its Latin American neighbor. Faster, in fact, than any country in the Western Hemisphere — an accomplishment that helped President Cristina Fernández de Kirchner cruise to reelection in October. According to the Center for Economic and Policy Research, Argentina has grown 94 percent since 2002, when it emerged from a severe recession and the biggest debt default in history. Several factors — fiscal stimulus, rising consumer spending, strong demand for agricultural and automotive exports, unorthodox government policies such as re-nationalizing private pensions — have enabled Kirchner to slash poverty, unemployment, and income inequality.

Downside: Surging imports are shrinking trade surpluses while heavy public spending is depleting fiscal surpluses and fueling inflation, which is officially at 9 percent but privately estimated to be more like 25 percent. The foreign reserves Argentina has been harnessing to pay down debt are decreasing, and the Central Bank of Argentina predicted this week that the economy will grow at a slower pace in 2012 because of a “weaker increase in global economic activity.”

G-20: Look for Argentina’s economic successes to embolden Kirchner, who is set to meet one-on-one with President Obama on Friday. According to Argentina’s Clarín, one of Kirchner’s priorities in Cannes will be to “export her economic ‘model.'” The nations to whom Argentina still owes billions of bailout dollars may respond that they’d just like the money, thanks very much.

Above, an employee of Argentina’s National Institute of Statistics and Census holds a sign showing the difference between official inflation figures and alternative estimates during a Jan. 2008 demonstration in Buenos Aires.

Juan Mabromata/AFP/Getty Images


GDP growth: 2 percent

Unemployment rate: 5.2 percent

Upside: It sounds odd to put it this way, but Australia is going into the G-20 with a relatively strong economy … for a developed country. During a public appearance in Cannes on Wednesday, Australian Prime Minister Julia Gillard explained that her country has low debt, low unemployment, and solid public finances. The country owes a lot of its economic success to booming global demand for its commodities, especially in the mining industry.

Downside: The strong Australian dollar is hurting the country’s manufacturing and tourism industries, employment outside the resource sector is weak, and slow growth in Europe and China, Australia’s biggest trading partner, is taking its toll on the export-dependent economy. This week, the Reserve Bank of Australia cut interest rates for the first time in over two years in response to these very concerns.

G-20: Gillard’s rhetoric in the weeks leading up to the G-20 suggests she’ll take an assertive stance at the summit. She’s called on European leaders to stop “muddling through” the continent’s debt crisis and urged the U.S. and Japan to pursue fiscal sustainability and new sources of growth. She’s also pledging to double Australia’s support for the International Monetary Fund to help stabilize the global economy.

Above,  a June 2010 protest against a controversial mining tax. Gillard’s government is still pushing the tax in an effort to balance Australia’s budget and spread mining wealth to other sectors of the economy.

Paul Kane/Getty Images


GDP growth: 6.6 percent

Unemployment rate: 6.8 percent

Upside: Indonesia, the world’s most populous Muslim country, has one of the top-performing economies in the G-20. Southeast Asia’s biggest economy boasts low inflation, low debt, and an accelerating growth rate. Economist Nouriel Roubini praises the country for deriving so much of its GDP from domestic consumption, while others wonder whether Indonesia now deserves to take its place among China, Brazil, India, Russia, and South Africa as one of the up-and-coming BRICS economies.

Downside: The Economist argues that the young democracy is plagued by corruption and is too reliant on exporting commodities like coal, gas, and palm oil to China and India. In October, Indonesia’s central bank, fearing a global recession, cut its benchmark interest rate to stimulate domestic demand.

G-20: Indonesia will be pushing development policy in Cannes. “The President says that although what is happening in European countries and the United States is an important issue to address, we should not forget the agenda for developing countries to progress with their development,” Indonesia’s deputy finance minister explained, according to the Jakarta Post.

Above, an Indonesian vendor walks past the construction of an elevated road in Jakarta in Sept. 2011.

Romeo Gacad/AFP/Getty Images


GDP growth: 1.75 percent

Unemployment rate: 9.9 percent

Upside: France is still a major economic force in Europe, boasting the eurozone’s second-largest economy and working with Germany to spearhead the effort to resolve the region’s debt crisis.

Downside: French President Nicolas Sarkozy recently cut France’s growth forecast and announced a new round of austerity measures as he seeks to maintain France’s AAA credit rating amid warnings from ratings agencies and balance the budget by 2016 in the face of mounting public debt. Markets are especially nervous about the exposure of French banks to shaky sovereign debt, and unemployment is at an 11-year high. The Financial Times adds that France is falling behind Germany in terms of growth, export market share, and employment.

G-20: Sarkozy, whose approval rating is floundering months ahead of a likely reelection campaign, is hosting the Cannes summit and emphasizing the need to make progress on a debt crisis solution. However, he is seeing what was meant to be a triumphant moment turning to one of uncertainty and fear. The Guardian points out that the debt crisis has overshadowed Sarkozy’s attempts to make the G-20 less about crass capitalism by, for instance, inviting Bill Gates to speak on development.

Above, protesters in Paris express solidarity for the Occupy Wall Street movement in Oct. 2011.

Miguel Medina/AFP/Getty Images



GDP growth: 7 percent

Unemployment rate: 9.1 percent

Upside: Turkey’s economy has tripled in size over the last decade. Turkish officials are actually worried Turkey is growing too fast. Last month, Mehmet Yorukoglu, a Turkish central bank official, announced that the institution was trying to slow down growth to avoid imbalances between Turkey and trading partners such as Europe and the U.S. with weaker demand. “We have very good fundamentals at home,” he explained. “The public sector finances are very healthy, the banking sector is very healthy, productivity and output growth is very strong, but demand imbalances between our economy and the economies we export to may create financial stability risks.”

Downside: With all its growth, Turkey is beginning to look a lot like the United States — before the financial crisis. Last week, Turkey’s central bank rolled out measures to curb runaway bank lending. “Across the country, the signs of rampant consumer spending are on display,” the Wall Street Journal wrote on Wednesday. “Huge billboards advertise advantageous loan rates for anything from cars and houses, to holidays and weddings. It isn’t uncommon for middle-class Turks to have four or five credit cards.”

G-20: Amazingly, in this time of economic turmoil in Europe, Turkey is still complaining about not being able to join the European Union. Turkish Prime Minister Recep Tayyip Erdogan has said as much this week in an interview with Germany’s Bild newspaper and in a press conference with German Chancellor Angela Merkel. “Our membership would be a win for both sides,” he explained. “We wouldn’t be a burden but would take burdens away.”

Above, people protest against the government’s economic and labor policies on Oct. 8, 2011 in Ankara.

Adem Altan/AFP/Getty Images


GDP growth: 2.9 percent

Unemployment rate: 7 percent

Upside: Germany boasts Europe’s largest economy and has been an anchor of economic stability on the continent, taken a leading role in developing a regional response to the debt crisis.

Downside: There are some signs that regional instability and slowing growth in major emerging markets are taking their toll on Germany’s export-driven economy. In October, the country’s unemployment rate rose and manufacturing contracted for the first time in about two years. Germany’s Economy Ministry says the economy may increasingly rely on domestic demand rather than exports to sustain growth, which is slowing.

G-20: German Chancellor Angela Merkel will push for financial market regulation in Cannes, but German officials have admitted that she’ll probably walk away empty-handed. She’ll also look to seal a debt crisis deal announced by European leaders last week and bolster the  International Monetary Fund (IMF) so that it can support the plan.

Above, an activist in Berlin holds a placard with a West German banknote and the words “There is life after the Euro” ahead of a parliamentary vote on a debt crisis deal in Oct. 2011.

John MacDougall/AFP/Getty Images


GDP growth: 3.5 percent

Unemployment rate: 6.0 percent

Upside: Brazil, buoyed by an expanding consumer class and the export of commodities such as soy and iron ore to China, will overtake Britain this year to become the world’s sixth-largest economy, according to an Economist Intelligence Unit forecast. Brazil experienced a rush of foreign investment last year when its economy grew by 7.5 percent — the fastest rate in Brazil in nearly a quarter of a century. And that was in the aftermath of the global financial crisis. 

Downside: Brazil’s commodities-fueled economy has slowed down significantly this year amid slowing demand in China and Europe’s economic woes, and the Wall Street Journal noted this week that Brazil’s industrial output is shriveling up as “factories wither under the weight of a soaring currency, crumbling infrastructure and sprawling bureaucracy.” The contraction raises “questions about the long-term sustainability of Brazilian growth,” the paper added. The Paris-based Organization for Economic Cooperation and Development expressed particular concern about inflation in a report last month.

G-20: Brazil’s economy may be threatened by instability in Europe (and the effect that instability has on China), but Brazilian officials have shown little desire to help Europe solve its fiscal problems and will likely criticize their European counterparts in Cannes. Last week, the country rejected the idea of buying European bonds to help ease Europe’s debt crisis, though it did say it might provide financial assistance through the  International Monetary Fund. “The Europeans always take too long to find solutions,” Brazilian finance minister Guido Mantega complained recently.

Above, people walk past a Rio de Janeiro newsstand with papers reporting on the world economic situation in Aug. 2011.

Antonio Scorza/AFP/Getty Images


GDP growth: Less than 1 percent (possible decline)

Unemployment rate: 4.1 percent

Upside: Japan’s economy, the third largest in the world, has been slowly recovering from a recession triggered by the devastating tsunami and earthquake in March.

Downside: Japan’s export-driven economy is faltering in the face of Europe’s debt crisis, slowing global growth, floods across much of Asia this fall, and a soaring yen. The government is also struggling to roll out a $250 billion rebuilding effort at a time when its debts are already twice the size of the economy.

G-20: Japanese officials will press the E.U. to strike a debt deal and raise the issue of the strong yen, which recently necessitated an aggressive government intervention. “Tokyo is keen to win G-20 understanding that a strong yen is one challenge too many,” Reuters writes.

Above, Nissan Motor president Carlos Ghosn chants slogans in July with workers at a wharf facility in suburban Tokyo that is recovering from the earthquake.

Yoshikazu Tsuno/AFP/Getty Images

Uri Friedman is deputy managing editor at Foreign Policy. Before joining FP, he reported for the Christian Science Monitor, worked on corporate strategy for Atlantic Media, helped launch the Atlantic Wire, and covered international affairs for the site. A proud native of Philadelphia, Pennsylvania, he studied European history at the University of Pennsylvania and has lived in Barcelona, Spain and Geneva, Switzerland. Twitter: @UriLF

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