At a press briefing before an EU summit last week, UK Prime Minister Gordon Brown emphasised the need for "co-ordinated exit strategies from the crisis". Asked whether that referred to the timing or the nature of the strategy, Brown said both would become clear at the G20 talks (24-25 September). However, according to policymakers and economists, expectations of an historic agreement such as Bretton Woods are unlikely to be met.
European heads of state and government met in Brussels on 17 September to agree on a position for the Pittsburgh talks. The summit's final statement spoke of unity on strategies for exiting the crisis once the recovery had taken hold (EurActiv 18/07/09).
At the Council briefing after the summit, Swedish Prime Minister Fredrik Reinfeldt, whose country currently holds the rotating EU presidency, said "explaining a coordinating exit strategy will be a main topic at the Pittsburgh summit".
Reinfeldt also said the G20 talks would include urgent action on soaring unemployment levels forecast to reach 11% in 2010, a post-war record. "Each and every unemployed person is a lost opportunity for further growth and prosperity. We need to take action and turn around this development," he said.
But EU policymakers fear that world leaders will forget the big picture at the summit. Financial reform is more than just bonuses, says Alexandra Pardal, head of EU policy at the Party of European Socialists. "We are facing a jobs crisis and the EU must act on this," says Pardal.
Speaking on Tuesday (22 September), French Economy Minister Christine Lagarde said she is worried that signs of recovery are creating a sense of complacency which will undermine the talks in Pittsburgh.
"This meeting is a real challenge," she told a news conference. "We are currently seeing, notably in the United States, sufficient signs of recovery that numerous players are saying [...] let's go back to our old habits and carry on with our business as we did in the past."
"There is a clear lobby in London that wants to defend its competitive advantage tooth and nail," German Finance Minister Peer Steinbrück said on Wednesday (23 September), attacking the UK for blocking tougher regulation of the industry.
In Germany, chief economists at the country's biggest banks rounded on Chancellor Angela Merkel for singling out the bonus culture as the principle issue and accused her of using it as an electoral platform, playing on voters' jealousy of bankers' pay checks.
Transatlantic divide too great for change
A fundamental disagreement on the cause of the crisis and how to resolve it is set to undermine Pittsburgh's potential to lay down binding agreements, says Simon Tilford, chief economist at the Centre for European Reform.
"A few months ago there was genuine talk of a Bretton Woods-type contract for macroeconomic policy, that is, bring surpluses down and deficits down, but now we are unlikely to see a substantive agreement on the management of the international economy," he said.
The US administration will look to the G20 talks to resolve the issue of global imbalances in the world economic order, which in US opinion is the reason the crisis occurred, says Tilford. In Europe, global imbalances are not perceived as the primary cause.
The submitted draft states that G20 members with current account surpluses will "pledge to implement policies that will boost domestic demand-led growth".
The economist argues the US will insist on steps to stimulate countries' domestic demand and decrease its own surpluses. "This position is untenable as it is a beggar thy neighbour position which will lead to further protectionism," Tilford adds.
However, the economist insists rebalancing is necessary to ensure the recovery is not short-lived, because high surpluses and high deficits will act as a drag on the world economy.
Germany is the most 'parochial'
"Germany has showed the least amount of commitment of the EU member states," according to Tilford. The economist called the country's approach "inward-looking", arguing that it is returning to business as usual: relying on exports and ignoring the need to stimulate domestic demand.
On the issue of imbalances, Berlin has persistently rejected calls for a binding mechanism to boost domestic demand and has said previously the most it would agree to is a policy-monitoring mechanism.
Pending elections in Germany this week and regional elections next year have prompted a departure from the country's previous tough rhetoric on a co-ordinated exit strategy from the crisis. Finance Minister Steinbrück announced cuts in spending and increases in taxation before the G20 meeting.
Similarily, the UK followed its own agenda pre-G20, and announced sweeping public spending cuts to strengthen the country's recovery (EurActiv 17/09/09).
Ideological divide in the European Parliament
The global divide on how to tackle the crisis - hammering out exit strategies versus stimulating employment and regulating financial services - is also the subject of an ideological row in the European Parliament.
Alexandra Pardal says she sees a breach opening up between the left and the right and insists priorities in the EU and at the G20 should not be exit strategies but entry strategies: measures to create and safeguard jobs and growth.
Pardal lambasts the EPP, led by German Chancellor Angela Merkel, for its "irresponsible position" on exit strategies in the wake of growing mass unemployment and soaring public deficits. She also criticises the Swedish EU Presidency for prematurely lobbying for Europe's exit strategies.
Ambitions in the European left
'Shut down tax havens!' is one of the more ambitious calls of a new campaign coined 'Regulate Global Finance Now!' which was launched in Brussels on Monday (21 September) by Party of European Socialists (PES) leader Poul Nyrup Rasmussen. The new campaign is intended to run in tandem with a similar initiative in the US, dubbed 'Americans for Financial Reform'.
The PES says it has had a strong working relationship with prominent US democrats for eight years and is currently in dialogue with Barney Frank, a leading congressman, on the financial crisis. Today (23 September) party leader Rasmussen is participating in talks at the Clinton Global Initiative.
The former Danish prime minister, who is arguably the EU's most vocal advocate of tougher regulation of financial markets, criticised the Swedish EU Presidency for weakening the EU's position on financial reform at the launch of the campaign, especially with regard to a financial transactions tax and a directive to regulate alternative investment funds.
