Syria, bonds and economic imbalances: the G20 kicks off in St. Petersburg
St. Petersburg (AsiaNews/Agencies) - Economic growth in the developed world, the financial problems of emerging nations and armed intervention in Syria are the issues that will dominate the G20 meetings which opens this morning in Russia. The leaders of the 20 most developed economies in the world are more confident about their own banking systems, and the United States, Europe and Japan have finally started to grow.
Leaders from 20 of the largest economies are more confident about their banking systems than at any other time since they began meeting five years ago. What's more, the economies of the United States, Europe and Japan are finally growing simultaneously.
Yet fears are rising about emerging nations, which have helped drive the global economy for years: Growth is slowing, investor money is leaving and borrowing costs are rising, in part because of higher interest rates in the United States.
The result is a more divided world than the leaders faced at previous summits of the Group of 20 major economies - a disparity that could make any major breakthroughs at the summit elusive.
Issues beyond economic ones will surely seize part of the agenda. The threat of a US-led military strike against Syria, in response to what the Obama administration calls a deadly chemical weapons attack, is certain to arise. Russian President Vladimir Putin, an ally of Syrian President Bashar Assad and the host of the G-20 summit, has asked President Barack Obama to reconsider any military action.
Some countries may also take the opportunity to complain about spying by the US National Security Administration.
The problems engulfing emerging countries like India, Indonesia and Turkey illustrate a key challenge. The problems stem in part from expectations that the Federal Reserve will soon slow its monthly bond purchases. The bond purchases have been intended to keep US borrowing rates ultra-low to stimulate growth.
Long-term US rates have been rising in anticipation that the Fed will slow its bond buying. Those higher rates have, in turn, led investors to pull money from developing countries and invest it in US assets. India's currency, the rupee, Indonesia's rupiah and Brazil's real, among others, have plunged in response. The rupee sank to a record low against the dollar last week.
At the same time, the leaders will likely address the developing countries' concerns in their statement when the summit ends. Zhu Guangyao, a Chinese deputy finance minister, says the United States "must consider the spillover effect" of scaling back its bond-buying. "Even if it's just a plan or a thought, you must have more communication," Zhu said late last month. China isn't as vulnerable to the Fed's policies as other developing countries. It limits its currency's ability to fluctuate. And it's sealed off its financial system from global capital flows.
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