The Results Of G20

Opinion (Michael Khazin, an economist, from “The result was so insignificant that I don’t really know what to write. First of all, no specific measures to save Greece were announced; the scandalous referendum that might have led to Greek exit from the eurozone was cancelled.

“Actually, the fact that the media devoted more time to this cancellation than to the summit is very significant. How Greece can pay even the reduced debt is still a question. After debt relief, the debt level will still be same as in the beginning of the Greece “rescue” operation.

“The media reported that at the summit meeting, which lasted two days, the countries devoted more time to the issue of stimulating economic growth on a global scale, rather than specific problems. But from the summit conclusions it is not obvious how to keep aggregate demand from falling and whether it can be done at all.

“How can one talk about stimulating the economy without formulating the reason for this stimulation, what the effect of the stimulation will be, what the cost of this stimulation is, and finally, when this will be complete? But these issues are a complete mystery for those who follow the world’s political leaders.

“The host of the summit, Sarkozy, announced an increase in the IMF resources to assist with the debt crisis. But the amount of money needed to address all the issues was not specified. And here we are talking about trillions per year, which are non-existent, and thus there is nothing to rejoice in yet. But since the representatives of G20 did not discuss this topic, there is no one to argue with.

“Another significant statement was made by Obama who said that he was able to negotiate yuan flexibility with China. Whether it is good or bad is the question because China is usually not inclined to compromise, and such concession could mean that China’s economy might not be doing too well, and yuan may start depreciating.

“It is important to note that in addition to Greece, the summit also discussed the issue of Italian public debt, which exceeded 120 percent of its GDP, and the fact that the situation in Italy is quickly slipping to the one of Greece. Actually, I do not really know what else to write.

“The crisis is developing quietly, aggregate demand is falling, the risks in the financial sector are growing, unemployment is rising, and social unrest is escalating. And G20 behaves as if everything is quiet and calm, and only some minor blots on the general background of the global economy require little effort to correct them.

“The spectacle is rather pathetic and sad. It is not interesting to discuss it. I have repeatedly written that these guys cannot be reformed: Not only they do not want, they cannot do anything; they have no control levers, even the language that can describe the current problems. Science does not know what to do with them. But while they are in power, we will see nothing but demagoguery. And the crisis will continue.”
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