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As crisis fades, G20 tries to get its mojo back

G20 finance ministers and central bank governors gather for a photo at the start of the annual International Monetary Fund and World Bank fa
G20 finance ministers and central bank governors gather for a photo at the start of the annual International Monetary Fund and World Bank fa

By Jason Lange

WASHINGTON (Reuters) - Top officials for the world's biggest economic powers get nostalgic over how they mobilized to save the world from economic collapse in 2008. They are not nearly so glowing about their current muddle.

At meetings held in Washington last week, there was a sense that the Group of 20, which brings together policymakers who oversee the vast majority of global output, has grown bogged down by a sprawling agenda no longer focused by crisis.

"It's very difficult to coordinate and to come up with meaningful results," said Ksenia Yudaeva, a deputy central bank governor for Russia, which organized this year's G20 meetings.

"Every step in right direction gets smaller and smaller."

Gone are the heady days of 2008 and 2009 when leaders at G20 summits hashed out major deals on fiscal stimulus and trade policy to counter a global financial crisis that threatened worldwide depression. In 2010 and 2011, the group was a forum for prodding European officials to come up with a plan to keep the euro zone from breaking up.

Since then, the list of issues on the G20 agenda has ballooned. It now includes everything from climate change and food security to youth unemployment, as if the body were a mini United Nations.

"What's happened is that the objective of the G20 has become confused," said Martin Parkinson, Australia's treasury secretary. He said the body needs to focus more squarely on its core mission of making the global economy stronger and more stable.

Some of the challenges before the group are so great they will not be resolved anytime soon.

The world's economy remains dangerously unbalanced, economists and officials agree, with countries like China relying too heavily on exports and others like the United States depending too much on imports. This leads to uncontrollable capital flows that can inflate dangerous bubbles.

Policymakers are still dealing with the wreckage of a burst debt bubble that cratered the U.S. housing market. They worry that super-low interest rates used to fight recession in advanced economies may have created new bubbles around the world.

MISSION CREEP

While the G20 meetings on Thursday and Friday were dominated by concerns about a political crisis in Washington that could trigger a U.S. debt default, officials also spent time trying to figure out how they might get their mojo back.

Finance ministers and central bankers tried to make their common statement as short as possible and also held meetings on how to trim the number of issues the forum should address.

Australia, which will host G20 meetings next year, hopes to put a brake on some of the mission creep. Parkinson said he hopes to focus next year on tying up loose ends, such as implementing new financial regulations leaders have already agreed to undertake.

"If we really want to have success at a G20, then we have got to have discipline over what we put on (the agenda)," he said.

Part of the problem is that the G20 came into its own during the greatest financial panic since the Great Depression.

Emergencies have a way of focusing leaders' attention and agendas. Now that the world economy is recovering, it's harder to reach deals or even agree on what needs fixing first.

"We have drifted a bit," said Canadian Finance Minister Jim Flaherty.

Another reason the G20 agenda has become unwieldy is simply the size of the forum.

With so many players at the table, representing disparate economic and political systems ranging from Western, free-market democracies to the likes of China, with a command economy dominated by the state, agreeing on a tight, common-interest agenda is a taxing proposition.

"Each country gets one thing added to the agenda. Next thing you know you have an encyclopedia that comes out of the leaders' statements," said Faryar Shirzad, global head of government affairs at Goldman Sachs.

The G20 includes Argentina, Australia, Brazil, Canada, China, France, Germany, India, Indonesia, Italy, Japan, the Republic of Korea, Mexico, Russia, Saudi Arabia, South Africa, Turkey, the United Kingdom, the United States and the European Union.

The membership list is unlikely to be trimmed anytime soon, however. Previous economic forums were dominated by rich nations that no longer account for the majority of global economic growth, and a primary rationale for the group's formation was to foster more cooperation among advanced and emerging economies.

"There isn't another forum that would get us all at the table," said British Finance Minister George Osborne.

Leaders want to have that table ready if they need to spring to action once again.

"If there's a real crisis ... I think that's very important that we're all intimate," Osborne said.

(This version of the story removes an extraneous words from paragraph six.)

(Reporting by Jason Lange; Additional reporting by Louise Egan; Editing by Dan Burns and Bill Trott)

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