Simon Johnson, who has already declared that the G20 summit is "headed for disaster," briskly works through the draft communiqué, which is floating around and up at the Financial Times. Johnson finds some dark humor in promises by signatories to commit to "candid, even-handed and independent IMF surveillance," arguing that in real life this will never happen. He's undoubtedly correct, but then this is the spin-zone of diplomacy we're talking about, so what's real and what's not gets confused.
Increasingly, the G20 looks like a meeting about IMF replenishment, with little progress on the headline issues, notably stimulus and a global regulatory framework. Johnson focuses on three points to keep an eye on in the final communiqué: how much additional funding the IMF will get; what form this funding will take; and which deep-pocketed emerging market countries, notably Saudi Arabia and China but also Mexico, Brazil and others, get on board. If the number is low, say $250 billion, and if China and Saudi Arabia don't contribute, then this will be worse than even he expected.
In the FT Tuesday, Peter Thal Larsen offers a nice overview of how formidably complex the process of bank regulatory reform is even just in a European context. Larsen quotes Dirk Schoenmaker of the Duisenberg School of Finance in Amsterdam: "A stable financial system, an integrated financial system and national financial autonomy are incompatible." As Larsen adds, "One of the three must be sacrificed."
It's a little hard to tell how high expectations are for this meeting, though there's a tendency among pundits -- not just Johnson -- to declare it very important but certain to disappoint. Treasury Secretary Tim Geithner has been racing around giving interviews on stimulus and global regulatory reform, as he did in Tuesday's FT. Maybe he should cool it. But for most Americans, cars matter a lot more than the G20. As for the market, one has to expect that at least some of the lower expectations emanating from the media, particularly the blogosphere, have been priced into stocks. On the other hand, maybe they'll be a breakthrough. We can always dream. - Robert Teitelman
See G20 draft communiqué from FT.com
See story from Baseline Scenario
See Larsen's column from FT.com
Robert Teitelman is the editor in chief of The Deal.
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