Friday, September 6, 2013

Emerging market pain dominates G20 talks

Emerging and developed G20 powers are struggling to find common ground on over the turmoil unleashed by the prospect of the US reducing dollars to global economy.

The Group of 20, which united in response to global crisis in 2009, now faces a US economy picking up, Europe lagging and developing economies facing blow-back from the looming 'taper' of the Federal Reserve's monetary stimulus.

"Our main task is returning the global economy towards steady and balanced growth. This task has unfortunately not been resolved," Russian President Vladimir Putin told leaders as they met at an annual summit in St Petersburg.

Leaders signed off on a jobs and growth initiative, as well as steps to combat international tax evasion and tighten financial regulation. But concerns persisted that renewed market turbulence could hit developing economies hardest.

"Systemic risks, the conditions for an acute crisis relapse, persist," Putin said.

The summit was overshadowed by great-power tensions over the Syria crisis, with leaders addressing security matters over dinner after their traditional debate on a world economy that is doing slightly better than a year ago.

Departing from his prepared remarks, Putin avoided referring to risks arising from US monetary policy. But the message from the BRICS caucus of emerging markets, which met earlier, was unmistakably aimed at Washington.

The BRICS announced they would commit $100 billion (Sh8.79 trillion) to a currency reserve pool that could help defend against a balance of payments crisis, although the mechanism will take some time yet to set up.

"The eventual normalisation of monetary policies needs to be effectively and carefully calibrated and clearly communicated," Brazil, Russia, India, China and South Africa (BRICS) said in a joint statement.

That language reflected the text agreed by G20 finance ministers in Moscow in July.

Russian Deputy Finance Minister Sergei Storchak said a passage on so-called "spillovers" would be unchanged in the closing summit communiqué.
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