April 27, 2010
Canada came to the G20 meeting of finance and central bank officials in Washington, saw and heard from its peers, and at the end of the day conquered.
Much of the success was due to Canada’s willingness to move away from its traditional Western allies — and their massive debt loads — and join forces with the dynamic and fiscally healthy emerging economies.
And it’s with good reason Canada is warming up to China and other emerging economies. Not only are they growing, but they are getting more clout, as China overtook European countries in World Bank voting power, in a shift agreed upon yesterday.
Finance Minister Jim Flaherty and Bank of Canada governor Mark Carney won the backing of the major emerging economies on a proposed bank tax, and as a result the G20 communique failed to endorse the levy.
Instead, the G20 asked the International Monetary Fund, which had endorsed the tax, to explore alternatives, including a Canadian suggestion that would see banks insure themselves against failure by issuing debt that can be converted into equity at times of trouble.
“The outcome on the bank-levy debate showed that the United States and its transatlantic allies of Britain, France and Germany no longer drive and determine the outcomes of key G20 debates,” said John Kirton, a foreign-policy expert and G20 watcher at the University of Toronto. “Here the Canadian coalition won on this issue.” And while Europe debated what to do with its problem child Greece (which has requested up to US$60-billion in emergency aid), Mr. Flaherty was throwing his weight around again about the need for developed economies to follow Canada’s lead and sketch out a plan to return to budget balance.
“There are a number of Western industrialized economies, including a number of European economies, that are running substantial deficits and accumulating a lot of debt,” Mr. Flaherty warned. “Those issues need to be addressed and can’t go on indefinitely, especially since we are starting to see good indications of economic recovery.”
Read the rest of this article at financialpost.com.