‘G20 differences delaying recovery’

MUMBAI: Differences within the Group of 20, the forum of countries and central banks which meet periodically to discuss key economic issues , is delaying the consensus on the future course of global level initiatives to get the world economy back on track, according to RBI deputy governor Subir Gokarn .

Mr Gokaran said on Wednesday that some countries are worried about currency appreciation while others are worried about the sudden exit of capital on a sudden global development or shock. In the advanced economies, however , the concerns are centred around the slowing momentum of recovery, stubbornly high rates of unemployment and persistent output gaps. The G-20 comprises 19 economies and the European Union and is represented by the finance ministers and central bank governors who meet to discuss global economic issues.

The G-3 — America, Europe and Japan — are caught in fierce policy debates on stimulus and exit strategies. At the heart of this debate are two issues that pit the short-term against the medium term. First, whether additional fiscal stimulus at this stage will jeopardise medium-term fiscal sustainability while the second issue relates to whether continued expansionary monetary stance — QE2 in popular jargon — will be an adequate substitute for the waning fiscal stimulus, and the implications an ultra loose monetary policy may have for medium-term inflation trends.

Financial safety nets, was another issue that divided the house. The differences he said, were more in terms of approaches and not principle . Yet another dividing line was financial regulatory framework, which on one hand let some economies take more risk than others. With these differences, it was difficult to forge a consensus, yet the recent IMF reforms show that the group has found a way out, he said.