Global finance chiefs this week will make their most concerted effort yet to redefine the world economic order in the era after Donald Trump and the coronavirus pandemic.
With trade tensions no longer bedevilling the Group of 20 economies in the way they did during the former US president’s tenure, the first in-person meeting of its finance ministers since the disease struck last year will attempt to forge consensus on unfinished business ranging from climate change to corporate taxation.
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Alongside those issues, the July 9-10 gathering is likely to take stock of an incomplete global recovery, clouded by the persistent threat of setbacks from new variants of the coronavirus. That may focus minds on the need for continued fiscal efforts to support growth, amid mounting inflation concerns and oil prices that remain elevated following this week’s breakdown in OPEC+ talks.
“The global economies are working together again,” said Rosamaria Bitetti, an economist at Luiss University in Rome. “This is a huge opportunity for the G-20 to think about how this pandemic showed that in our interconnected world, problems are global and need to be addressed together, leaving nationalism behind.”
With Italy hosting the meeting in Venice as chair of the group, the symbolism of convening in a former hub for trade between continents won’t be lost on participants. They can also look to the name of the city’s fire-cursed opera house — La Fenice, or the Phoenix — for inspiration on what to strive for in the embers of an unprecedented global crisis.
The risk is that the scars of discord that haunted international meetings during the Trump years might persist, including echoes of his frequently touted suspicion of China.
For Bruno Le Maire, the French finance minister, the onus is now on the group to build on the consensus it achieved during early stages of the pandemic.
“The G-20 must show in Venice that it can still meet its responsibilities and be able to provide concrete, new and radical responses to the challenges ahead in a continuation of what it has succeeded in doing since February 2020,” he told reporters Tuesday.
Here’s a closer look at some of the areas for discussion:
Finance chiefs will likely discuss ongoing efforts to combat the pandemic’s economic impact, a dialogue that may embrace both the need for continued government support and the prospects of inflation taking hold.
US Treasury officials, briefing reporters Tuesday, said Secretary Janet Yellen will urge other countries not to withdraw COVID-related fiscal measures prematurely. She will also encourage longer-term thinking about boosting economic growth, pointing to President Joe Biden’s proposals for spending on infrastructure, workforce support and green investments.
Such an emphasis also signals that, at least for US officials, keeping the economic recovery on track still carries more urgency than inflation fears. The same is true for Europe, with countries wary of removing generous stimulus too soon and the European Central Bank downplaying price fears.
Countries will also discuss ways to avoid excessive divergence between economies as concerns mount about the impact of new virus strains on the recovery.
Even just within Europe, the rebound is “highly uneven”, according to the European Commission, which this week predicted Germany and the Netherlands will reach pre-crisis levels of output a full year ahead of Italy and Spain. That phenomenon is playing out across the globe, auguring widening disparities between countries and regions.
“The world is facing a worsening two-track recovery,” IMF Managing Director Kristalina Georgieva said in a blog post on Wednesday. “It is a critical moment that calls for urgent action by the G-20.”
The G-20 has long struggled to agree on how to combat climate change, and this meeting, in a city more vulnerable than most to rising sea levels, is likely to feature yet more debate.
In an address at a separate climate change conference on Sunday, Yellen may reiterate the US view that marshalling private finance will be crucial in addressing the problem.
Under Biden, the US is catching up with efforts by Europe to prepare a system for requiring companies to disclose more information about how climate change threatens their operations. Climate-related financial disclosures may be an issue discussed at both the G-20 and the subsequent conference.
Ministers are set to endorse a global deal among 131 countries brokered by the Organization for Economic Cooperation and Development that proposes a minimum corporate tax of at least 15%, and new rules for dividing up the tax revenues from the world’s largest companies.
While discussions are scheduled to continue until October when G-20 leaders meet in Rome, a preliminary nod in Venice would mark another important step toward reshaping the global tax landscape.
The negotiations could still get bogged down over disagreements such as how much tax revenue should be redistributed to developing economies, and whether countries will meet the US demand to withdraw digital levies once new global rules are in place.
Special drawing rights, known as SDRs, will also be among topics as the International Monetary Fund prepares the biggest resource injection in its history to help boost global liquidity and help emerging and low-income nations deal with mounting debt.
France is pushing for rich countries to re-lend their new SDRs so that Africa ultimately receives a total of $100bn. To meet that goal, the IMF will need to find an effective mechanism and countries beyond the Group of Seven will need to participate.