15 November 2013

ECFIN Economic Brief: The G20@5 - Is it still delivering?

In the five years since G20 Leaders first met, the G20 has become the premier forum for global economic policy coordination. The question is whether the G20 can maintain and even strengthen its role in the future and how it can achieve this.

This Economic Brief argues that the G20 has moved from an initial high performance equilibrium to a lower one, which nevertheless continues to deliver important public goods. However, in order to remain relevant, the G20 needs to define more precisely where and how policy coordination and cooperation at international level can be effective in fulfilling the G20's overarching objective of achieving strong, sustainable and balanced growth at the global level. The Economic Brief provides some suggestions in this regard.

Excerpted from Conclusions

The G20 is here to stay and the G20 is still needed. However, to ensure its legitimacy and credibility, it needs to continue to provide global public goods. Otherwise it would risk to become a talking shop (as it was in its pre-Summit period), whose usefulness can rightly be put into question. The G20 also needs to resist the temptation to look continuously for new topics if it is unable to deliver concrete results hic et nunc in terms of economic policy coordination23.

It is also essential that the G20 improves its effectiveness to avoid diminishing commitments from its members. The coordination of economic and financial policies is the core task of the G20. The coordination process has made an important step forward this year with the Action Plan for Growth and Jobs adopted in St Petersburg, which is now stronger and more consistent than before. However, more is needed. Next year the G20 will have to follow up on the mandate of Leaders to develop comprehensive growth strategies for presentation at the 2014 Brisbane Summit. They will need to go beyond past Action Plans and ensure more ownership. Our experience in Europe shows that there are three key prerequisites for success: first, a common analytical framework and agreed objectives; second, willingness by countries to undergo peer review; and third, a monitoring system to assess delivery.

In sum, in order to maintain and further strengthen its relevance the G20 should:

(i) reform its working methods;

(ii) focus on key objectives;

(iii) build on the executive function of Leaders;

(iv) improve its legitimacy.

In the post-Lehmann world it is difficult to think that the redefinition of the growth regime at the global level can be left to unregulated markets and national authorities alone. Furthermore the objective of a strong, sustainable and balanced growth set in Pittsburgh is still far from being achieved. The durable reduction of global imbalances, global demand rotation, economically and environmentally sustainable growth, job creation, and the rebuilding of a resilient and stable financial sector are the key challenges that still require international economic cooperation and that the G20 will have to address from here to the end of the decade. In the end, the future of the G20 will depend on the answers it will be able to provide to these challenges...

While the jury is still out, more work is needed before drawing conclusions on whether the G20 has been or not the game-changer that has definitely proven the advantages of global economic cooperation and coordination. There is, however, no doubt that the G20 has played a critical role in providing an initial effective response to the financial crisis and since then has continued to deliver important global public goods.

Full brief

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