G20 finance ministers and central bankers are meeting in Moscow to tackle emerging threats to growth. Their agenda includes the jobs crisis in Europe, currency fears in emerging nations and corporate tax avoidance.
The two-day meeting in Moscow comes at a time of multi-speed economic development within the Group of 20 nations, a forum comprising advanced economies as well as emerging countries.
China, which has been the engine of growth in recent years, is facing a slowdown as concerns over the stability of its financial system are mounting.
The United States seems headed for a self-sustaining recovery, while Japan has re-invigorated its economy by embarking on a monetary experiment aimed at boosting growth with higher inflation.
By contrast, the European Union remains locked in a severe recession with unemployment at record levels notably in the 28-nation bloc’s southern periphery.
EU jobs crisis tops agenda
The jobs crisis in Europe is at the center of a meeting between G20 finance and labor ministers on Friday.
Noting that the world needed Europe to grow, US Treasury Secretary Jack Lew told Bloomberg Television that Europe must do what it can to get the engine of growth moving again.
EU Employment Commissioner Laszlo Andor spoke in a similar vein, telling Reuters news agency that an end to austerity and investment in jobs was vital for maintaining social peace.
“If, in the name of competitiveness, you just compress wages constantly, you also kill demand and you kill the recovery,” he added.
Monetary tsunami vs. crashing currencies
Better coordination of monetary policy is being demanded by the group of emerging nations in the G20.
The recent announcement by the United States central bank to gradually scale back its monetary stimulus for the US economy has caused an exodus of capital from countries such as Brazil, Russia, India, China and South Africa.
Moreover, the reversal of the “monetary tsunami” – as Brazilian President Dilma Rouseff called the flood of cheap money – has caused the US dollar to rise and national currencies to fall sharply. This fall has increased inflationary pressures, forcing India and Brazil – for example – to tighten liquidity at a time when their economies are struggling.
Crackdown on corporate tax evasion
The finance ministers’ meeting, which comes in preparation for a G20 summit in September, is expected to approve a plan aimed at intensifying the battle against corporate tax avoidance.
On Friday, the Organization for Economic Cooperation and Development (OECD) unveiled an action plan aimed at closing legal loopholes used by companies such as Apple, Google and Starbucks to avoid paying billions in taxes.
Currently, tax systems respect inter-company contracts, even if they clearly seek to shift profits out of countries where they are earned and into low or no-tax jurisdictions, the OECD said.
The governments’ frustration with companies’ aggressive tax avoidance had created a once-in-a-century opportunity to overhaul the rules, said Pascal Saint-Amans, the director of the OECD’s Center for Tax Policy.
The finance ministers are expected to give the OECD a two-year mandate to work out specific measures which can be adopted internationally.