G20 will promote fiscal consolidation

G20 leaders are determined to reduce debt and promote financial consolidation.

During the first day of the G20 summit, leaders discussed two broad categories of issues related to the global financial situation. The first involved macroeconomics. Leaders supported a plan aimed at promoting growth and job creation. They also discussed how to stimulate investments and prevent volatility of capital flows.

According to Russian Finance Minister Anton Siluanov, the global economic situation is better than it was last year.

Developed economies like the United States and the European Union are showing stable growth and all eyes are now on developing economies, which are slowing down because the policy of quantitative easing is about to end. Siluanov added that the era of easy money is over.

IMF chairwoman Christine Lagard agreed that soon money would be more expensive. According to Siluanov, the pace of this process is the main concern of the G20 leaders, but U.S. President Barack Obama promised that the process would be gradual.

The developing nations represented at the summit insisted that any steps be well-considered since the volatility of capital flows has increased significantly.

The second part of the discussions focused on how to encourage global economic growth. All leaders supported a plan to fight tax debasement (in which companies avoid paying taxes in countries where they operate), and agreed to develop a way to implement this plan over the next two years.

Leaders also discussed financial regulation and supported the idea of regulating activities of big banks (those that are considered “too big to fail.” Currently there are 28 such banks and 9 insurance companies.

The G20 leaders debated structural measures that can be separated in two groups. The first one includes measures that would be unique to each country, such as infrastructure, new legislation and job creation. The second group is made up of global structural measures aimed at preventing protectionism and promoting free trade.

Leaders endorsed the concept that fiscal consolidation does not threaten economic growth and all countries agreed to reduce their debts in both the mid- and long-term.

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