“The world is watching G20's steps to tackle financial instability emanating from eurozone periphery”
Prime Minister Manmohan Singh told leaders meeting in this southern French resort town on Thursday that the entire world was watching and that “our summit will be judged by our ability to deal with financial instability emanating from the eurozone periphery.”
In the face of uncertainty over events in Greece, Dr. Singh said he hoped “ways can be found to manage the situation so that a package can be put in place as quickly as possible.”
Dr. Singh's tete-a-tete with French President Nicolas Sarkozy was postponed due to an emergency meeting of eurozone leaders. Aides are attempting to reschedule the meeting, which will most likely take place on Friday afternoon. Dr. Singh met his counterparts from Brazil, China, Russia and South Africa at the invitation of Brazilian President Dilma Rousseff.
In his address to the G20 during a working lunch, Dr. Singh said India supported the International Monetary Fund's role in restoring stability in Europe. However, “the IMF must also keep in mind the liquidity requirements of developing countries who are not at the centre of the crisis, but may nevertheless be adversely affected as innocent bystanders.”
Orchestrating a broad-based recovery and sustainable growth in industrialised and developing countries was what the Mutual Assessment Process, decided upon at the last G20 summit, is meant to do. “The task of restoring fiscal sustainability over the medium-term calls for very different policy prescriptions,” Dr. Singh said.
Stressing the need to intensify and deepen the Mutual Assessment Process, he said the global community must focus on structural reforms in all G20 countries to increase efficiency and competitiveness over the medium-term. “This would help revive the animal spirit of investors, which is necessary to allow us to shift the burden of sustaining demand from the public to private sector. Such rebalancing is necessary to make the recovery sustainable. We in India are taking steps to ensure a return to high growth.”
The Prime Minister also told the assembly that short-term problems of financial instability should not be allowed to cloud the development needs of poor and emerging economies whose nascent growth is threatened by “slowing trend growth in developed countries.” Since multilateral development banks played a major role in mobilising and deploying global savings, the G20 should “raise its level of ambition for these institutions” so that they can play a transformational role.
Dr. Singh warned against the introduction of regulatory reforms such as a financial transaction tax as suggested by industrialist Bill Gates in his report on boosting development finance in the world. The Prime Minister said he was against reforms that “would end up hampering the developmental goals” of the emerging and poor nations. He called on the G20 to send a strong message to curb tax evasion and illicit capital flows.
Earlier, Montek Singh Ahluwalia, Deputy Chairman of the Planning Commission, briefed journalists on the Prime Minister's discussions with other leaders. Pointing out that India had no quarrel with “bilateral generosity,” Mr. Ahluwalia said India's preference was for concerted action through the IMF — “through various mechanisms.” The quotas of countries could be increased or members could loan money using the IMF as a conduit for investment.