Text size:

  • Small
  • Normal
  • Large

Economics at G20 must come before politics

An agreement by the G20 is important. But politics might yet stand in the way of economic reform.

There will no doubt be plenty of politics on the agenda at this week's meeting of the G20. The escalating crisis in Syria, the situation in Egypt, what happens in the row between Russia and the United States over the whistle-blower Edward Snowden: all of these will be discussed in the coming days.

But the main topic will be the global economy. The G20 was formed during the biggest financial crisis of the modern era, creating a forum for large economies to talk to each other. The 20 nations that make up the summit together account for over 80 per cent of total global economic output and the financial crisis hit them hard.

Half a decade on, the United Kingdom and the US appear to be returning to modest growth. The European Union has avoided, for now, the need to further bail-out the economies of its members. China continues to grow, but its banks were not as exposed to the crisis as western banks were.

Banking reform remains at the top of the G20's thoughts this week. The 2008 financial crisis began when Lehman Brothers collapsed. The impact on the global markets of such a collapse spooked politicians, to the point where they concluded that other banks of equivalent or greater size than Lehman could not be allowed to collapse. They had become "too big to fail", with leaders reasoning that allowing them to go under risked taking the entire global system with it. The result was the shoring up and even part nationalisation of banks in Europe and North America.

Since then, the G20 has sought to find ways to reduce the chance that such a crisis could occur again. The difficulty with banking regulation is that banks operate across national borders, so regulation needs to be coordinated, or banks will simply operate from the most favourable banking environments.

The banking system needs transparency and trust. So far, the G20 has agreed that big, international banks should hold more capital than purely national banks, so that they will not become over-leveraged. But there needs to be clarity over how banks that are headquartered in one country but operate in others - like so many international banks in the UAE - will deal with another crisis.

It will not be easy to find agreement on such regulation, but it is vital. Five years on, the effects of the crisis still cause real harm to real people, affecting economic growth, wages and house prices. An agreement by the G20 is important. But politics might yet stand in the way of economic reform.

Back to the top

More articles

Editor's Picks

 Ali Benflis, opposition leader and main rival to Algerian President Abdelaziz Bouteflika speaks to the press after casting his vote in the presidential elections at a polling station in Algiers on. Former prime minister Benflis ran against Bouteflika in 2004 but lost heavily, charging the vote was rigged 10 years ago and has said fraud will be his ‘main adversary’ during the election. Patrick Baz / AFP Photo

Best photography from around the world, April 17

The National View's photo editors pick the best images of the day from around the world.

 Above, the private pool of Ocean Heights' five-bedroom penthouse flat. Courtesy Christie’s International Real Estate

In pictures: Penthouse flat is height of Dubai luxury living

A five-bedroom penthouse in Ocean Heights in Dubai Marina is on sale for Dh25 million and comes with a private pool and an unparalleled view of Dubai.

Video: Local reactions to a national fishing ban

A federal fishing ban has been imposed by the UAE federal government, but local authorities are taking diiferent approaches to implementing the ban. Two fishermen tell two very different sides of the story. Produced by Paul O'Driscoll

 Southampton owner Katharina Liebherr is pictured before the Premier League match between Southampton and Liverpool at St Mary's Stadium in Southampton, southern England, on March 1, 2014. Glyn Kirk / AFP

New Southampton owner leading club’s resurgence from the shadows

Katharina Liebherr keeping with family tradition and letting others dominate the spotlight

 The new Bentley GT Speed convertible on display at a press event of the New York International Auto Show. Jason Szenes / EPA

In pictures: Hot cars at New York International Auto Show

With more than 1 million visitors annually, the New York International Auto Show is one of the most important shows for the US car industry. Here are some of the vehicles to be shown in this year’s edition.

 The cast of Fast & Furious 7, including Michelle Rodriguez and Vin Diesel, centre, on set at Emirates Palace in Abu Dhabi. Jeffrey E Biteng / The National

Fast & Furious 7 filming in full swing at Emirates Palace

Filming for Fast & Furious 7 has started and we have the first photos of the cast and crew on set at Emirates Palace hotel this morning. Visitors staying at Emirates Palace say they have been kept away from certain areas in the grounds.


To add your event to The National listings, click here

Get the most from The National