G-20 fails to agree on global bank tax, financial reforms
Finance ministers of the world's 20 leading economies, including India, have failed to agree on a controversial proposal for a global tax on banks or other reforms, suggesting one size does not fit all.india Updated: Apr 24, 2010 12:25 IST
Finance ministers of the world's 20 leading economies, including India, have failed to agree on a controversial proposal for a global tax on banks or other reforms, suggesting one size does not fit all.
"The global recovery has progressed better than previously anticipated, largely due to the G-20's unprecedented and concerted policy effort," the ministers said in a joint communiqué after a meeting in Washington on Friday.
"However, it is proceeding at different speeds within and across regions, and unemployment is still high in many economies," they said suggesting that "in such circumstances different policy responses are required".
Describing the group's "Framework for Strong, Sustainable and Balanced Growth" for the global economy as a key mechanism, the group said it had agreed on principles to direct the development of alternative policy scenarios for a "strong, sustainable and balanced growth".
The ministers promised to deliver an initial set of policy options for consideration by the June 2010 Summit in Toronto.
Finance Secretary Ashok Chawla represented India in the absence of Finance Minister Pranab Mukherjee.
On the International Monetary Fund (IMF) proposal to establish a tax on bank profits and on salaries paid to bank executives, the group called for more research into measures that would hold banks responsible.
More work was needed on how to ensure that financial firms "bear the burden of any extraordinary government interventions where they occur", said the ministers ahead of the Fund-World Bank meetings Saturday and Sunday.
Canada, whose banking system withstood the crisis, has led the opposition to the idea, while the Obama administration, which has called for a $90 billion levy to be collected over 10 years from banks that got bailout money, is a key supporter.
Developing countries and smaller wealthy nations whose banks played no role in causing a financial crisis that engulfed the globe in October 2008 have also resisted the idea.
In economies where growth is still highly dependent on policy support and consistent with sustainable public finances, it should be maintained until the recovery is firmly driven by the private sector and becomes more entrenched, the group suggested.
"We should all elaborate credible exit strategies from extraordinary macroeconomic and financial support measures that are tailored to individual country circumstances while taking into account any spillovers," the ministers said.
"Countries who have the capacity should expand domestic sources of growth," they said, suggesting this would help cushion a decline in demand from countries that should boost savings and reduce fiscal deficits.
The ministers also "recommitted to developing by end-2010 internationally agreed rules to improve both the quantity and quality of bank capital and to discourage excessive leverage".
These rules will be phased in as financial conditions improve and economic recovery is assured, with the aim of implementation by end-2012, they said.