TWN Info Service on Finance and Development (Oct11/01)
12 October 2011
Third World Network  

Leading agencies call for coordinated policy action
Published in SUNS #7235 dated 10 October 2011
 
Geneva, 7 Oct (Kanaga Raja) - To restore confidence to the world economy and improve growth and employment perspectives, strong measures are needed to ensure fiscal consolidation coupled with structural reforms, and it is crucial that these efforts are coordinated internationally.
 
This is one of the main messages highlighted in a joint communique issued by German Federal Chancellor Angela Merkel and the heads of five international organizations on the occasion of their meeting in Berlin on 6 October.
 
The heads of the five international agencies are Angel Gurria, Secretary-General of the Organization for Economic Cooperation and Development (OECD), Director-General of the World Trade Organization (WTO) Pascal Lamy, Director-General of the International Labour Organization (ILO) Juan Somavia, Managing Director of the International Monetary Fund (IMF) Christine Lagarde, and World Bank Group President Robert B. Zoellick.
 
In the joint communique, released ahead of the Cannes G20 Summit (3-4 November), the German Chancellor and the heads of the five agencies said that the global economy, still recovering from the 2008 financial crisis, is experiencing growth but may now be entering a new and more dangerous phase.
 
According to IMF forecasts, the world economy is going to grow by just 4% in 2011 and 2012.
 
"There are developments that threaten the sustainability of growth and give rise to serious concern. Joblessness will remain high, with 20 million jobs still missing in the G20 countries to regain the pre-crisis employment rate."
 
Moreover, said the communique, debt levels have risen dramatically in many countries as a direct consequence of the recession following the crisis, but also of unprecedented support of the financial sector as well as the fiscal stimulus efforts by governments to revive growth and employment. As a result, trust in and by financial markets as well as in fiscal sustainability have been undermined significantly.
 
"To restore confidence and to improve growth and employment perspectives, strong measures are needed to ensure fiscal consolidation coupled with structural reforms. Policy action will need to maximise synergies between macroeconomic and structural instruments. It is crucial to coordinate these efforts internationally."
 
Chancellor Merkel and the five agencies' chiefs welcomed the ambitious agenda on world economy issues drafted for the G20 Cannes Summit and hoped that promises will be followed by action and results.
 
They further welcomed that the five international organizations - the IMF, the World Bank, the ILO, the OECD and the WTO - have strengthened their cooperation and continue to do so in support of a more sustainable and inclusive economy.
 
They went on to highlight their cooperation in several particular areas.
 
"We welcome the progress achieved in addressing the financial crisis. Extraordinary fiscal stimulus policies have prevented economies from deteriorating further. As debt levels have risen, primary emphasis should be given to credible medium- to long-term consolidation policies, e.g. 'debt brakes', while being careful about not affecting middle-term growth perspectives and pursuing structural reforms to boost growth and jobs," they said.
 
According to the joint communique, sound macroeconomic policies have to go hand in hand with endeavours to increase employment, drawing on the ILO's Decent Work Agenda and on its Global Jobs Pact approach adopted at the ILO International Labour Conference of 2009. Stimulating productive investment in job-generating enterprises of the real economy is a priority.
 
The German leader and the agency heads welcomed the outcomes of the most recent G20 Employment and Labour Ministers' meeting, which they saw as an important contribution to the creation of new jobs and the reinforcement of social protection.
 
"We are convinced that trade has an important role in fostering global growth and employment. Given the current economic environment, it is crucial that countries continue to resist protectionist pressures. We regret that the WTO Doha Round has not yet led to success."
 
Beyond the positive economic growth impact, the joint communique noted, multilateral trade opening remains important as a means of ensuring fair competition, preventing trade distortions and creating new market opportunities, especially for developing countries.
 
"The G20 Summit in Cannes should give a fresh political signal with a view to a successful WTO ministerial conference in December. We believe that a clear roadmap for concrete deliverables in trade opening and rule-making in 2012 is needed."
 
As another lesson of the crisis, Chancellor Merkel and the heads of the five agencies said that they are "considering to expand our traditional concepts of growth. GDP, as the main indicator of economic development, could be complemented by including appropriate social, employment and environmental aspects, addressing the well-being of people in a more comprehensive manner."
 
In this context, they noted that the Stiglitz Commission as well as the German and French Councils of Economic Advisors have delivered some fundamental ideas for this approach.
 
"Climate change and the protection of natural resources remains one of the main challenges of our time. These challenges could also become an opportunity for growth. The potential for low carbon development and green growth needs to be realized by targeted action in developed and developing countries. All international organisations are committed to promote and work together on green growth. We are working towards a successful COP [Conference of Parties] in Durban and will further promote low-carbon development strategies," they further said.
 
They highlighted that the revolution in the Middle East and North Africa reflect the peoples' wish for more freedom, opportunity and the rule of law.
 
"While each country must find its own path for change, the success of the transformation process will require strengthened governance, growth with inclusion, a well-functioning market economy, good education and job opportunities. We are ready to support the countries by numerous initiatives and programmes, helping them to build accountable institutions, and providing greater market access."
 
The joint communique stressed that to bring the global economy to a strong, sustainable, and balanced growth path in the long run, international cooperation has to be more and more based on a common sound understanding and policy towards globalisation.
 
"Therefore, the trust-based dialogue between developed and developing countries will have to be continued. By further intensifying cooperation between themselves as well as with governments, the IMF, the World Bank, the ILO, the OECD and the WTO will continue to be valuable partners for governments in the different areas of a modern globalisation policy," it concluded.