G20 Nations Commit to Strengthening Defenses Against Brexit Challenges, According to Reuters

By Jan Strupczewski and Gernot Heller

CHENGDU, China – Leading economic policymakers from around the world announced on Saturday their commitment to enhance global growth and ensure its equitable distribution amid rising dissatisfaction with globalization and the aftermath of Britain’s Brexit vote.

During a meeting in Chengdu, China, finance ministers and central bankers from the Group of 20 (G20) nations convened to address the global challenges posed by Brexit and other economic uncertainties.

A climate of protectionism looms over discussions, notably influenced by U.S. Republican presidential candidate Donald Trump’s "America First" agenda, which includes potential withdrawal from various trade agreements.

In a draft communique seen by Reuters, the G20 ministers acknowledged that while economic recovery is ongoing, it remains below desired levels. They emphasized the need for growth benefits to be distributed more broadly among countries to foster inclusivity.

The draft, subject to revisions, indicated that Brexit has heightened uncertainty within the global economy. Nevertheless, G20 members are "well positioned to proactively address the potential economic and financial consequences."

U.S. Treasury Secretary Jack Lew stressed the importance of G20 countries collaborating to stimulate shared growth through a combination of monetary, fiscal policies, and structural reforms aimed at enhancing efficiency.

Chinese Finance Minister Lou Jiwei advocated for improved policy coordination to encourage sustainable growth, noting that traditional fiscal and monetary tools are becoming less effective over time. He urged G20 nations to enhance policy communication and guide market expectations through more transparent and forward-looking monetary strategies.

This meeting marked the first G20 gathering since the Brexit vote and was also the inaugural appearance of Britain’s new finance minister, Philip Hammond. Questions arose concerning the timeline for the UK’s formal negotiations to exit the EU, with many nations expressing concern that any delay could exacerbate global economic uncertainties.

In light of the Brexit decision, the International Monetary Fund revised its global growth forecasts downward. Recent data illustrated these concerns, as a British business activity index recorded its most significant decline in two decades.

Italian Economy Minister Pier Carlo Padoan expressed hope for clarity regarding the timing and process of Brexit, suggesting that a prompt resolution could establish a new equilibrium. Meanwhile, French Finance Minister Michel Sapin indicated that while the UK may not have been prepared for Brexit, its response shouldn’t extend indefinitely.

German Finance Minister Wolfgang Schaeuble argued that it is not the responsibility of other countries to compensate for the consequences of Britain’s exit, stating that it’s an issue for the UK to resolve independently.

During discussions about currency matters, Lew reiterated the need for G20 members to refrain from engaging in competitive devaluations, as previously agreed upon.

The Japanese yen, often viewed as a safe haven during market volatility, appreciated to approximately 100 against the dollar following the Brexit vote, a development that concerned Japanese officials. However, it has since reassessed to around 106 per dollar.

Market analysts are speculating on a potential expansion of the Bank of Japan’s substantial stimulus measures in light of the yen’s strength, which has negatively impacted exports and hindered efforts to combat deflation. Bank of Japan Governor Haruhiko Kuroda expressed willingness to implement further policy easing to meet the 2 percent inflation target but dismissed notions of the radical "helicopter money" strategy, which would involve direct central bank financing of government debt.

Waltransitionary results from historical experiences caution against integrating monetary and fiscal policies in such a direct manner.