The perilous fiscal condition of Greece and other countries in Europe, and the need for the world’s big economies to coordinate changes in financial regulation, were the other major topics in the daylong meetings of G-20 finance ministers and central bank governors.
“The global recovery has progressed better than previously anticipated, largely due to the G-20’s unprecedented and concerted policy effort,” officials said in a joint statement.
The IMF endorsed a proposal this week that would establish a tax on bank profits and on salaries paid to bank executives. 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 received bailout money, tried to marshal support for it. “There was not agreement on a global bank tax,” Jim Flaherty, the Canadian finance minister, said at a news conference after the meetings. “Some countries are in favor of that. Some countries quite clearly are not. It depends whether a country has had to use taxpayers dollars to bail out banks, for the most part.”
Basic principle
Treasury Secretary Timothy F Geithner defended the idea. “We’re trying to establish the basic principle that where governments are exposed to risk in putting out financial fires like this, that taxpayers don’t bear the costs of paying for those actions,” he said, adding, “That is a simple, fair, basic imperative.”
Geithner said there was “significant support” for the bank tax, but allowed that he understood a “certain lack of enthusiasm” from Canada.
He added, “We’re going to do what’s necessary for the US, what’s in our interest, and I think the world’s going to want to watch what we do. And I suspect that’ll provide a basis for other actions across some of the other economies.” The cautiously worded joint statement acknowledged, but sidestepped, the bank tax proposals. It called for further IMF study “on options to ensure domestic financial institutions bear the burden of any extraordinary government interventions where they occur, address their excessive risk-taking and help promote a level playing field, taking into consideration individual countries’ circumstances.”
John Lipsky, the Deputy Managing Director of the IMF, said on Friday, that the bank tax, if calculated based on the risk banks posed to the financial system, “could help to discourage financial institutions from taking on excessive risk.” Such a fee would also “address the public policy concern that financial institutions are able to privatise gains but socialise costs arising in the financial sector,” he said.
Although India and Brazil this week joined calls by the US for China to allow the value of its currency, the renminbi, to appreciate, the G-20 officials said the topic did not come up in their meetings.IMF projected on Friday, that economic output in sub-Saharan Africa would expand by 4.75 per cent this year and 5.75 per cent next year, up from 2 per cent last year.