G20 warns on the perils of British exist

High quality global journalism requires investment. Please share this article with others using the link below, do not cut & paste the article. Britain has persuaded the Group of 20 leading economies to warn about the risks the UK leaving EU would pose to the global economy.“Downside risks and vulnerabilities have risen, against the backdrop of volatile capital flows, a large drop in commodity prices, escalated geopolitical tensions, the shock of a potential UK exit from the European Union and a large and increasing number of refugees in some regions,” the final communiqué from the G20 meeting in Shanghai said. High quality global journalism requires investment. Please share this article with others using the link below, do not cut & paste the article.

US Treasury secretary Jacob Lew spoke even more strongly. “We see a stronger UK, a stronger EU, a stronger global economy and a more secure world with the UK in the EU,” he said, “which is why we believe it’s important for the voters of the UK to think of the consequences this decision will have both within and outside the UK.”George Osborne, UK chancellor, had been pushing the G20  about the dangers of the UK leaving the EU. “If that’s their assessment of the impact on the world economy, imagine what it would do to the UK,” he said.

“This isn’t some amusing adventure into the unknown. A British exit would hurt people’s jobs, livelihoods and living standards – it’s deadly serious.It’s my responsibility as Chancellor to make it clear to people what the economic risks are – and that we are stronger, safer and better off remaining in a reformed EU.”Other risks to global stability highlighted by the G20 include “a large and increasing number of refugees in some regions”.

G20 policymakers vowed to adopt a range of policy tools to lift global growth and avoid currency wars, according to officials close to the talks.The final communiqué does not include a specific deal on using fiscal policy to stimulate growth but there was consensus that monetary policy alone was not adequate to boost global growth than had been the case before.

High quality global journalism requires investment. Please share this article with others using the link below, do not cut & paste the article. “Monetary policies will continue to support economic activity and ensure price stability, consistent with central banks’ mandates, but monetary policy alone cannot lead to balanced growth, the communiqué said.There was a clear recognition that you cannot print your way out of this situation,” said one participant who asked not to be named. “There is a sense that all levers matter and increasingly so [in the case of] structural policy”.

Senior finance officials of several European nations and the US had played down expectations that the talks would yield any bold moves to boost global growth. But the communiqué suggests that market reaction to growth worries has been overdone.“Recent market volatility has not reflected that underlying fundamentals of the global economy,” the draft says.China also appears to have persuaded G20 participants that it intends to communicate its economic and currency policies more clearly in future.

Participants said Beijing appeared to make important progress in assuaging global concerns about the quality of its economic management with a charm offensive that included several public speeches by central bank officials and bilateral meetings on the sidelines of the G20 itself.“On the issue of devaluation of the renminbi, I think we heard loud and clear. that there’s no intention, no determination, no decision whatsoever to devalue the currency,” said Christine Lagarde, managing director of the International Monetary Fund.

Mr Lew, also endorsed China’s efforts to communicate its currency policy more clearly, with several central bank officials repeatedly stressing in recent days that devaluation was not on the agenda. “I think the communication that China has done these past days has helped not just ourselves but all observers to understand that more clearly, and I think that’s very positive,” he said.

Confusion about China’s currency policy has led to upheaval in currency and stock markets around the world in recent months.The final communiqué included stronger language than that used previously committing member countries, including China, to avoid using currency devaluations for competitive purposes: “We reaffirm our previous exchange rate commitments, including that we will refrain from competitive devaluations and we will not target our exchange rates for competitive purposes.”

Policymakers expressed concern not just about the renminbi during the meetings, but also about the Japanese yen. “The debate was also about Japan, to be honest — there was some concern that we would get into a situation of competitive devaluations,” eurogroup chief Jeroen Dijsselbloem said. Once one country devalues its currency, “the risk is very large that another follows and we get into competitive devaluation,” he said.

Jeroen Dijsselbloem, Ecofin president and representative of the Dutch EU presidency, told journalists on the sidelines of the conference that some market participants had been asking for a “big plan” to boost the economy. “I don’t think there is any need for a big plan, there is no crisis,” he said.


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