Geithner-Draghi No Show Risk Turning Mexican G-20 Into Flop
As Mexico gears up to host finance officials from the Group of 20 biggest economies a number of key absences threaten to turn the gathering into a non-event.
The no-shows at the Nov. 4-5 meeting in Mexico City include European Central Bank President Mario Draghi and U.S. Treasury Secretary Timothy F. Geithner, as well as the finance chiefs from Brazil and France. The presence of People’s Bank of China Governor Zhou Xiaochuan is uncertain. Without these power- wielding players, chances of having a meaningful gathering are slim to none, analysts said.
“Unfortunately, at a time of still many risks to the global economy, the G-20 has weakened substantially,” said Athanasios Vamvakidis, the London-based head of G-10 currency strategy at Bank of America Corp. “The G-20 rose to the challenge during the global crisis of 2008-09, but it seems irrelevant now. This makes all countries worse off.”
Unfortunate timing may be one reason for so many cancellations. The Nov. 4-5 meeting -- Mexico’s last before it hands the G-20 presidency to Russia -- comes as the U.S. is struggling to recover from the biggest Atlantic storm in history and hours before the Nov. 6 presidential election. China’s Communist Party is readying a once-in-a-decade power transition while Europe is focused on whether Spain will seek a bailout.
The absences “say more about the exigencies of domestic economic issues than it does about the future of the G-20,” said Daniel Price, who helped organize the 2008 summit for President George W. Bush and is now managing director at Washington-based Rock Creek Global Advisors LLC.
In the case of Geithner, who won’t be staying on regardless of whether President Barack Obama is re-elected, “one can understand why he’d want to stay put,” according to Price. The U.S. markets just re-opened yesterday after their longest weather-related closure since the 1880s.
Geithner is not coming because of a scheduling issue, said a Treasury spokeswoman. Heading the U.S. delegation will be his Undersecretary for International Affairs Lael Brainard. Stepping into Draghi’s shoes will be ECB Vice President Vitor Constancio, according to an ECB spokeswoman. A press official with the Mexican Finance Ministry said a list of confirmed attendees wasn’t available because responses were still coming in.
The G-20 has had mixed success delivering its goals outside of crisis conditions since its leaders first met as a group in late 2008 when the world was reeling from the fallout of the collapse of Lehman Brothers Holdings Inc.
An April 2009 summit in London ended with a $1.1 trillion plan to aid the world economy and the more diverse G-20 subsequently replaced the Group of Seven as the main forum for global policy coordination.
Still, members have backtracked on pledges to regain control of fiscal deficits and to avoid protectionism, as well as clashed on how to regulate banks, whether to impose a tax on financial companies and how much currency flexibility to allow. Developing nations have also criticized the use of monetary policy by rich nations to prop up growth, with Brazilian Finance Minister Guido Mantega accusing the U.S. and Europe of stoking a global “currency war.”
“There aren’t many incentives for cooperation in international economic policy at the moment,” Walter Russell Mead, a professor at Bard College and fellow at the Council on Foreign Relations, wrote in an e-mail. “Central banks in the U.S. and the EU are bent on a course that makes problems for many emerging markets, but the domestic forces supporting those policies are so strong that little will change.”
Mexican politics also played a role in undermining this weekend’s meeting, after outgoing President Felipe Calderon pushed up a summit of world leaders to before elections in July, said Jacob Kirkegaard, a research fellow at the Washington-based Peterson Institute for International Economics. Traditionally such end-of-year gatherings are the culmination of 12 months of work and two ministerial-level meetings by the host nation.
“That means that there is no real agenda for the G-20 right now, as there is no urgency for the hosts to present something the leaders can deliver on,” Kirkegaard wrote in an e-mail.
Calderon’s press office declined to comment when asked about whether electoral politics played a role in the scheduling.
Mexican central bank Governor Agustin Carstens said finance officials would follow up on talks held in June by heads of state, without undertaking new initiatives.
“I’d say that there really isn’t a new agenda,” Carstens said yesterday in Mexico City.
Deja-vu may also be setting in. It was only three weeks ago that many of the same financial leaders gathered in Tokyo for the International Monetary Fund’s annual meetings.
Not much has changed since then, when many of the same faces left at odds over how to tackle a global economy that is facing its third major brake on expansion in five years. China and Brazil, which three years ago helped lead the world out of a recession sparked by the U.S. mortgage meltdown, now face slowing growth at home.
“Diligent finance ministers won’t have recovered from their Tokyo jet lag, and here comes Mexico,” wrote Mead. That’s “crazy,” he said.
In the case of Europe, critical decisions need to be reached at a national level before they can be discussed on a global stage. Chief among those is whether Spain will act on Draghi’s offer made nearly three months ago of an ECB bailout for the debt-distressed nation.
“Sometimes the hardest decision is not to take any decision,” Spanish Prime Minister Mariano Rajoy told the Spanish Parliament yesterday.
Unless Rajoy makes his mind up between now and this weekend, there may be little his economy minister, Luis de Guindos, can tell his colleagues when he travels to the Mexican capital at the invitation of the G-20.
Putin Takes Over
This is not the first time this year high-profile summits have been marked by absences.
Russian President Vladimir Putin, fresh off winning elections, decided to skip a Group of Eight summit hosted in May by Obama at his retreat near Washington. Now it’s up to the Russian leader “to find a new agenda to reverse the decline” of the G-20, said Kirkegaard. Until then, there is sense of fatigue at too many meetings with too few results, he said.
To contact the editor responsible for this story: Joshua Goodman at firstname.lastname@example.org