Switzerland prepares to sit at G20 head table

Keystone

For the first time Switzerland is taking part in meetings of the finance ministers and central bank governors of the G20 group of the world’s most economically powerful countries thanks to support from Russia, which holds the G20 presidency.

In the past Switzerland has expressed a keen interest in participating in G20 preparatory work, but up to now it has not been represented at the G20 meetings of finance ministers and central bank governors.

A Russian invitation sent to the Swiss authorities in January, citing the alpine nation’s important role in the international financial system, changed all that.

A Swiss delegation, led by Finance Minister Eveline Widmer-Schlumpf and Thomas Jordan, chairman of the Swiss National Bank, will therefore join G20 finance ministers at the first meeting on February 15 and 16 in Moscow.

This will be followed by three more meetings later in the year: two during the meetings of the International Monetary Fund (IMF) in Washington in April and October and the other in Moscow in July.

“Switzerland is a financial centre of major importance, and has a national currency which is widely used on international markets. It is thus only natural that Switzerland has collaborated closely with the G20 over the past years,” declared Anne Césard, spokeswoman for the State Secretariat for International Financial Matters, attached to the finance ministry.

“Switzerland has consistently sought to contribute to the work undertaken in the Financial Stability Board (FSB) and the IMF, much of which is relevant for the G20 agenda. Now, by participating in the meetings of G20 finance ministers and central bank governors, Switzerland will be contributing to the process directly in 2013.”

Another factor that played in the alpine nation’s favour was its close relationship with Russia, which commended their “positive and fruitful bilateral cooperation”. The countries have held structured talks on financial matters since 2011, said Césard.

When the invitation was announced at the beginning of the year, Widmer-Schlumpf told reporters that Bern hoped to boost its global influence through its participation.

“Switzerland will seek to contribute to issues such as the implementation of regulatory standards, in particular on capital requirements for banks, the apparent conundrum between fiscal consolidation and growth, and the governance of the IMF,” said Césard.

Say one thing…do another

The main declared aim of the Russian presidency is to concentrate efforts on developing measures aimed at boosting growth and jobs creation around the world.

Moscow is proposing a multi-pronged growth strategy, including measures to strengthen financial regulation, enhance multilateral trade and develop trust and transparency.

It proposes to fight protectionism and reactivate the unsuccessful Doha round of world trade talks, which have been at an impasse for the past 11 years.

But words do not seem to match deeds. A 2012 report by Global Trade Alert (GTA), an independent monitoring platform, found that in 2009 G20 members were responsible for 60 per cent of global protectionist measures. By 2012 this figure had risen to 79 per cent.

“The contradiction arrives because protectionism has a bad public reputation but it is also politically very convenient,” explained the GTA report’s co-author Simon Evenett, a professor at St Gallen University.

Governments make public promises that they are not always in a position to keep, he added.

G20

The Group of Twenty (G20) is the premier forum for international cooperation on the most important issues of the global economic and financial agenda.

The objectives of the G20 refer to: policy coordination between its members in order to achieve global economic stability and sustainable growth; promoting financial regulations that reduce risks and prevent future financial crises; and modernizing international financial architecture.

The G20 brings together finance ministers and central bank governors from 19 countries: Argentina, Australia, Brazil, Canada, China, France, Germany, India, Indonesia, Italy, Japan, the Republic of Korea, Mexico, Russia, Saudi Arabia, South Africa, Turkey, Britain, the United States plus the European Union, which is represented by the president of the European Council and by the head of the European Central Bank.

The G20 was formally established in September 1999 when finance ministers and central bank governors of seven major industrial countries (Canada, France, Germany, Italy, Japan, Britain and the United States) met in Washington in the aftermath of the financial crisis of 1997-1998, which revealed the vulnerability of the international financial system in the context of economic globalization and showed that key developing countries were insufficiently involved in discussions and decisions concerning global economic issues.

Finance ministers and central bank governors started to hold annual meetings after the inaugural meeting on December 15-16, 1999, in Berlin. The first meeting of the G20 leaders took place in Washington on November 14-15, 2008, where the leaders agreed to an action plan to stabilize the global economy and prevent future crises.

G20 members represent almost 90% of global GDP and 80% of international global-trade. Two thirds of the world’s population lives in G20 member countries. And 84% of all fossil fuel emissions are produced by G20 countries.

Source: G20

Maturing

Another stated G20 priority is to build a more solid, less opaque financial sector. For this to happen the Basel-based FSB needs to come of age and be given favourable conditions to carry out its reforms, say the Russians.

According to FSB Secretary General Svein Andersen, changes to establish the FSB as an association under Swiss law are a step in the right direction, towards “the institutionalization of the FSB”. Until now it was an informal body created under a political mandate from the G7 and, since 2009, the G20.

During the 2013 G20 meetings the FSB is due to report on progress on financial reforms, closely follow derivative markets issues and look into issues affecting major banks like UBS and Credit Suisse, he added.

Too powerful?

The size of the G20’s power base – representing 90 per cent of the world’s gross domestic product (GDP) – continues to divide opinions, however.

Member states say the numbers justify its global leadership, but critics, including Switzerland, question whether such an informal group should hold so much power.

In 2009, during his appearance before the United Nations General Assembly, Swiss President Hans-Rudolf Merz called into question the G20’s legitimacy and lack of transparency when deciding on sanctions.

At the World Economic Forum (WEF) meeting in Davos last month Russian Prime Minister Dmitri Medvedev issued a mea culpa on this question and suggested changes.

“Very often my partners that are not part of the G20 have told me about their concerns. They complained that they are not represented in the G20, although their economies and states are exerting substantial influence on the world’s development and the global economy. We all realise that in this context the G20 is a fairly conventional entity and should not have absolutely precise borders,” he stated.

For now it is unclear whether 2013 represents a new era for Switzerland in its relations with the G20 or whether participation will simply come to an end in December. The answer should come next year from the other side of the world when Australia takes over.

“The regular dialogue between Switzerland and Australia on financial issues will provide an opportunity to discuss the priorities of the Australian G20 presidency for 2014,” said Césard optimistically.

(Adapted from Spanish by Simon Bradley)