G-20 Should Take Urgent Action on Global Economy, EU Draft Says

  • Nations should refrain from competitive devaluations, EU says
  • EU sets out priorities for Feb. 26-27 G-20 meeting in Shanghai

The world’s top finance ministers and central bankers should pledge to step up efforts to boost global growth at the Feb. 26-27 Group of 20 meetings in Shanghai, according to a European Union planning document obtained by Bloomberg News.

“The global economy is still facing considerable risks with global growth still falling short of expectations,” the EU said in the draft. “We need to act urgently to secure a strong and durable global economic recovery and the delivery of the 2 percent additional growth ambition by 2018.”

A collective push is required “despite a moderate increase in world economic growth expected in 2016” and countries need to take “prompt action” to follow through on their commitments, the EU said. It called on countries to make their debt more sustainable and use fiscal policy “flexibly” to account for near-term conditions. EU finance ministers will discuss the draft when they meet Friday in Brussels.

G-20 nations “should refrain from competitive devaluations and resist all forms of protectionism,” while monitoring developments and addressing emerging risks as needed, the document said. Earlier this month, European Central Bank Executive Board member Benoit Coeure suggested that G-20 nations this month will discuss ways to coordinate their exchange-rate policies amid the decline in currencies of major emerging markets.

International commitments to improve financial regulation need to be heeded, especially in the areas of shadow banking, derivatives regulation, “addressing excessive variability in banks’ risk-weighted assets” and cooperation on how to resolve cross-border failing banks, according to the draft. The EU also called for more work on supervising central counterparties, combating market misconduct, regulating correspondent banking and monitoring vulnerabilities that emerge in the financial system.

For example, the G-20 should keep an eye on “the liquidity mismatch between a fund’s holdings and its redemption terms” and how to assess non-bank, non-insurer globally significant financial institutions, the draft said. It also called for more work to combat terrorist financing and to press ahead with international tax standards.

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