The summer season of major international summits will kick off in Canada on June 25. The G8 will meet at Deerhurst Resort near the town of Huntsville, Ontario on June 25 and 26, followed by the G20 summit in Toronto on June 26 and 27.
The dates of the G8 and G20 summits have overlapped since 2008. No one disputes that all the world's leading economies, not just the G8 nations, must work together to solve the world's economic problems. But while they will all be gathered around the same table in Canada, they will no doubt put different solutions on the proverbial table.
It should be noted that both of these global seminars (decisions made at the summits are not binding, and even those agreed upon are rarely implemented) are about to undergo a radical change in terms of their roles and responsibilities. At least this is currently under discussion in Moscow and Washington alike.
Russian sources believe that the G8 has not yet outlived its usefulness, despite numerous statements to the contrary. The G8 can still deal with regional and global political issues, as well as disaster relief and health-related issues, high-ranking Russian diplomats in the United States said on the eve of the summit. U.S. President Barack Obama, for his part, said recently that global economic issues will be addressed by the G20 instead of the G8 in the future.
Obama believes there will have to be a transitional period, but that the G20 is destined to become the main global economic body going forward. It appears then that Moscow and Washington more or less agree that the G8 will be relegated to a political role. Only time will tell.
Based on the agendas for the summits, the G8 and the G20 will be entering into this transitional period while in Canada. The G8 summit will mainly deal with political issues, including the situation in Afghanistan and Iran, North Korea's nuclear program, as well as issues of piracy, health, environment, and terrorism. In turn, the G20 will address global economic problems, which are the most vexing problems for the international community.
There is consensus on what these economic problems are, but the consensus ends there. The summit in Canada will likely resemble a medical council, in which doctors with different specialties agree on the patient's diagnosis but offer differing and even downright opposing treatments.
Europe in general, and the euro zone countries in particular, will come to Canada with its own set of treatments. The U.S. may disagree, but the prescriptions have already been written for Europe's economies, banks and monetary systems.
These include severe austerity measures; drastic spending cuts in almost all EU countries (to reduce budget deficits); taxes on banking transactions (to create a "safety cushion" in case of bank failures - a reaction to the financial crisis in the U.S.); strict regulation of derivatives, hedge funds and other high-risk banking operations; a wage freeze, etc. All of these measures were approved at the last EU summit in Brussels on June 17.
Barack Obama tried to appeal to the EU's "economic conscience." He warned that these drastic cuts in government spending could put the economic recovery in jeopardy. In a special letter sent to all EU leaders on June 16, Obama argued that while the draconian austerity measures in Greece and Spain (the EU countries in the worst shape financially) could still be justified, drastic budget cuts (wage reductions, tax increases, etc.) in Germany, France, and Britain would have a devastating effect on the economic recovery in Europe, as these measures will reduce domestic demand and slow economic growth.
But EU president Herman Van Rompuy recently announced that if the G20 fails to follow Europe's lead, Europe will move forward on its own. Indeed, that is the most likely outcome.
Many in Europe doubt America's sincerity when it cautions Brussels about undermining a speedy economic recovery with austerity measures. The United States should not cling to hopes that Europe will be a convenient market for its products and services. As one European expert said, "we will not let America export its debts to us" by flooding Europe with its goods and using the European consumer to recover from the crisis that America created.
At the G20 summit in Toronto we are likely to see several fault lines. Russia, China and India do not support the bank taxes proposed by Europe. Russia's banking sector has not been significantly affected by the financial crisis, and so Moscow has no reason to impose additional fees on banks. That would run counter to the government's stated goal of turning Moscow into a global financial center. No bank will want to relocate to a country with additional taxes. Beijing and New Delhi hold a similar position.
The question presents itself: Will capital flow away from the bank-tax countries to the tax-free countries? Germany, France, the UK, Spain and the Netherlands have either introduced the tax or are preparing to. Almost all of these countries belong to the euro zone. Some speculative capital will certainly flee Europe as a result of the tax. However, the depreciation and possible collapse of the euro - the most likely effect of not implementing these measures - would have led to an even worse outcome for Europe, perhaps disastrous.
It seems, then, that we can expect heated debates in Canada if not much agreement.
The opinions expressed in this article are the author's and do not necessarily represent those of RIA Novosti.
MOSCOW. (RIA Novosti political analyst Andrei Fedyashin)
