The G20 (which actually has 22 states attending this year) met this weekend in London. The ongoing economic crisis, of course, dominated discussions. The meeting produced a communiqué in which the states commit themselves to restoring financial growth and strengthening the global financial system. Discussions were dominated by several important divisions between the member states, particularly between the developed and developing countries (largely over reform of the International Monetary Fund) and between the United States and Europe (over the urgency and scope of economic stimulus efforts). In the end, the only real, concrete policy initiative was the agreement to enlarge the membership of the Financial Stability Forum to include all G20 members. Created in the aftermath of the 1997 Asian Financial Crisis, the FSF monitors the global financial system and coordinates policies between the international financial institutions.
In news from outside the G20 meeting:
1. On Friday, Chinese Premier Wen Jiabao expressed concern over the mounting U.S. deficit and the future stability of the U.S. economy. The Chinese government currently holds an estimated 70 percent of its $2 trillion foreign exchange reserve in dollar-denominated assets and is the single-largest buyer of U.S. Treasury Bills. A decline in the value of the U.S. dollar therefore threatens China’s massive reserves. But while the Premier is pressuring the U.S. to ensure the stability of its currency, Luo Ping, the director general of the Chinese Banking Regulatory Commission, reassured the U.S. government (and dollar markets more generally), that the investment in the dollar remains the “only option” for Chinese foreign reserve holdings.
2. Secretary of State Hillary Clinton, fresh off her trip to the Middle East and Europe, will be visiting Mexico later this month to discuss the crisis resulting from the growth of drug cartels in the country. The U.S. and Mexico already have an ongoing anti-drug effort (currently valued at approximately $750 million). However, the effort has not been successful in curbing the growing influence of the cartels, and many observers fear that Mexico may fall to the cartels. The situation in Mexico has become so stark in recent weeks that the U.S. State Department has issued a travel advisory, and the U.S. Joint Forces Command has begun gaming exercises based on the assumption that Mexico could undergo a “rapid and sudden collapse.”
3. The deepening political crisis in Pakistan continues. Over the last week, the government has increased its crackdown on opposition party members, which they accuse of attempting to undermine Pakistan’s fragile parliamentary democracy. A series of nationwide protests led by many of the country’s lawyers has been demanding the “restoration of democracy and the rule of law.” On Sunday, the government placed Nawaz Sharif, leader of the Pakistan Muslim League-Nawaz, under house arrest and attempted to block protests in Islamabad, the country’s capital.
4. On Tuesday, Madagascar’s the army gave the country’s president, Marc Ravalomanana, a 72-hour ultimatum to resolve the ongoing crisis or resign from office. Madagascar has been suffering from an economic malaise due the collapse of the vanilla market, Madagascar’s main export. While the country has begun to attract foreign investment, Madagascar remains incredibly poor, with a GDP per capita of just $330, and inequality between rich and poor remains very high. Ravalomanana remains defiant. On Saturday, he addressed his supporters to say he would not be resigning.
5. In a new statement released on Saturday, Al Qaeda leader Osama bin Laden warned Arab leaders against cooperating with the West and renewed calls for his followers to prepare for jihad. Bin Laden singled out Egypt, Jordan, and Saudi Arabia, as countries headed by leaders that “have plotted with the Zionist-crusader coalition against our (Muslim) people.” Bin Laden also made reference to the recent conflict between Hamas and Israel in Gaza, describing it as a “holocaust.”