Yes, “Europe will be the focus of the Cannes Summit.” Although anticipated, the blunt statement from European Commission President Barroso and European Council President Van Rompuy seemed both redundant and inspiring. Redundant, because a €1 trillion commitment needs implementation and global coordination that only the G20 can offer. Inspiring, because this crisis serves as the needed impetus to drive collective aspirations by the G20 for attaining sustainable growth.
Reflecting on the goals of the French presidency of the G20 and its original ambition, however, one wonders about the fate of other crucial issues, such as the reform of international financial institutions (IFIs), food security, and international development.
The past two summits demonstrated near irreconcilable disagreements between main players on long-standing agenda items ranging from addressing financial regulatory reform, to tackling macroeconomic imbalances and the way forward for multilateral trade. Finding agreement on issues involving structural adjustments is by no means a short order. But measurable progress on items long identified as a priority by the G20 is inherently related to the group’s shelf-life and its ability to move from a temporary crisis-fighting mechanism to an enduring forum capable of shoring up market confidence and providing political leadership and vision to tackle global economic challenges.
Deliberation over the crisis du jour in Toronto and Seoul threatened to hijack both of those carefully laid out summit agendas. “Stimulus vs. austerity” debates prior to the Toronto summit sidelined anticipated agenda items related to the reform of IFI governance structures and a global bank tax, and competitive devaluation of currencies brought “currency wars” to the forefront of discussions in Korea. This is a trend that observers predict will continue in Cannes as leaders continue to grapple with implications of the euro rescue fund and the unexpected announcement of a Greek referendum on last week’s agreement.
Although Europeans used the argument of a possible hijacking of the G20 summit to raise the stakes of sealing a deal on the Eurozone’s rescue fund, given the rap sheet of previous summits, there is little doubt that this will be the case from the start. French diplomats even warned against the possible “cannibalization” of Cannes.
In anticipation, President Obama has announced that he will meet Chancellor Merkel and President Sarkozy, chair of the G20, bilaterally. Yet, at a time when Europe is calling on the rest of the world to contribute to the recovery of its economy for the preservation of global wealth, the French president is scheduled to meet with the Chinese president first, the U.S. president second. Cannes’ focus may be Europe, but Europe’s focus in Cannes will be the rest of the world.
After consecutive summits with subpar performances, the G20 is past due to repeat the early successes of delivering on its commitments. The creation of the Financial Stability Board (FSB), raising the IMF’s lending resources, and boosting the capital base of MDBs and the IMF by $1.1 trillion demonstrated concrete results. This first propelled the G20, ahead of its institutional competitors, to prominence as the much proclaimed post-modern vehicle for getting things done. But without tangible results, pledges for taking coordinated action on long-standing agenda items are in danger of falling on deaf ears, and will continue to harm the G20’s credibility.
Naturally, the forum should and will continue to serve as a platform to address pressing crises . However, Cannes provides an opportunity for the G20 to go one step further. By striking a delicate balance between devoting time to short-term imperatives, i.e the eurozone crisis, and exhibiting strategic foresight in making strides toward implementing previously identified commitments, such as bolstering the authority of the FSB, injecting political leverage into the reform efforts of IFIs, and promoting its development agenda, the G20 will continue to build its credibility.
While its current informality is the source of its flexibility, the G20 needs to find a way to address short-term shocks without sacrificing its capacity to deliver on its standing commitments. And despite the creation of the troika of hosts, instituting a mechanism to ensure the smooth transition of working groups and structures from one host-country to the next may facilitate the process of sticking to its check-list by prioritizing pledges.
Michael Froman is right when saying that the G20 has been promoted to become the leading forum to review challenges facing the global economy. But in any era of “messy multilateralism,” as characterized by Richard Haass, establishing its reputation as an effective and legitimate body that is capable of achieving results by transcending divides between established and emerging economic actors hinges on the group’s ability to start thinking and acting in the long term.
In an ironic way, it’s a conundrum Europe has been facing in building its economic and monetary union for the past 30 years…