As the spotlight shifts from the UN General Assembly and world leaders converge on Pittsburgh for the G20, there’s been much debate about the prospects for success and the competing agendas of member countries.

- The core negotiations seem set to finalise agreement over a “framework for balanced and sustainable growth” – particularly critical from US and Chinese perspectives – that seeks to give the IMF a greater reporting role in policing global imbalances. The FT’s Money Supply blog offers a sceptical comparison of the leaked draft agreement with the IMF’s current role.

- As to the Europeans: Gordon Brown seems to be adopting a broader focus, calling in an NYT op-ed for “a new system of governance” to form the “next common economic goal”. (He also announced that UK Business Minister Shriti Vadera would be going on secondment to the South Korean government to help develop proposals on global financial architecture ahead of their G20 presidency next year.) For Angela Merkel, the “most important subject” is financial regulation; she argues that “we must not search for substitute issues”; and for Sarkozy too, the top priorities look to be bankers’ bonuses and agreement over capital requirements for banks.

- Trade and protectionism are sure to form another important aspect of negotiations, particularly for China and India. VoxEU takes an interesting look at trends in world trade since the November 2008 Washington Summit,  highlighting how G20 states’ oft-proclaimed commitment against protectionism has been broken by member governments approximately once every three days since last year’s commitments. “No other statistic”, Simon Evenett argues, “better demonstrates the paucity of global leadership on contemporary protectionism”.

- Robert Zoellick, President of the World Bank, calls for the summit to focus on the world’s developing economies, highlighting the positive contribution they can make to the health of the global economy. Pittsburgh, he argues, can mark the advent of a more “responsible globalisation” founded on “multiple poles of growth”. Brazilian President, Luiz Inácio Lula da Silva, meanwhile, presents his take on the G20 grouping in the LA Times.

- Around the think tanks, finally: Brookings has an in-depth report focusing on some of the broader implications of the G20 agenda, from the protectionism issue to African and Latin American perspectives, as well as assessing the G20’s approach to climate change. The Carnegie Endowment, meanwhile, has an interesting take on Saudi Arabia’s approach to the summit, given its increasing exposure to instability in the financial markets and vulnerability to shifts in oil and food prices.

Elsewhere, Chatham House has analysis of some of the key short-term economic indicators, as well as long-term GDP forecasts – arguing that it is still to early too be coordinating exit strategies. The Canadian-based Centre for International Governance Innovation, meanwhile, takes a comprehensive look at some of the challenges facing the G20 as a forum for global economic governance, with contributions from policymakers and academics alike.

- With the anniversary of Lehman Brother’s demise, the FT recalls the events of that fateful weekend last September. The NYT has reflections of three former Lehman employees, while a Guardian roundtable asks what lessons, if any, we’ve learned from the bank’s fall. Niall Ferguson, meanwhile, rails against those who argue “if only Lehman had been saved”. He suggests:

Like the executed British admiral in Voltaire’s famous phrase, Lehman had to die pour encourager les autres – to convince the other banks that they needed injections of public capital, and to convince the legislature to approve them.

- Sticking with matters financial and economic, Der Spiegel has an interview with the head of the IMF, Dominique Strauss-Kahn, on the Fund’s actions during the crisis and the potential for a new role for the institution going forward. Former MPC member, David Blanchflower, meanwhile, offers a telling insight into the inner workings of the Bank of England’s decision-making as financial meltdown ensued.

- Elsewhere, the WSJ reports on President Sarkozy’s call to broaden indicators of economic performance and social progress beyond traditional GDP, following the findings of the Stiglitz Commission. Richard Layard, expert on the economics of happiness, offers his take here, arguing that “[w]e desparately need a social norm in which the good of others figures more prominently in our personal goals”.

- Wolfgang Münchau, meanwhile, assesses the implications of an Irish  “No” vote in the upcoming referendum on the Lisbon Treaty.  “There is an intrinsic problem for the Yes campaign in Ireland”, he suggests, “which is that the core of the treaty was negotiated seven years ago. This is a pre-crisis treaty for a post-crisis world… If we had to reinvent the treaty from scratch, we would probably produce a very different text”.

- Finally, last week saw the German Marshall Fund of the US publish its Transatlantic Trends survey for 2009. Unsurprisingly, a majority of Europeans (77%) support Barack Obama’s foreign policy compared to the 2008 finding for George W. Bush (19%); though the “Obama bounce” was less keenly felt in Central and Eastern Europe than Western Europe. A multitude of other interesting stats – on attitudes to Russia, Afghanistan, Iran, the economic crisis, and climate change –  can be found here (pdf).

A few weeks ago, I nearly blogged about growing opposition to IMF funding in the US, but thought it was something of a fringe position. I was wrong. House Republicans are so enraged by Obama’s G20 commitment to the IMF that they are voting to block a $106bn war-spending bill because an additional $5bn for the IMF has been included.

According to House Republican, Mike Pence:

Once the American people learn that the Democrats are using a war-funding bill for a global bailout, they’ll know what to do. We’ll take the message to the floor and to the American people, and I expect we’ll win this fight.

John Boehner, House Minority Leader, agrees. According to his spokesman:

It is the Democratic leadership that is playing politics with our troops by insisting on using them as leverage to pass over $100 billion in global bailout money for the IMF.

Republicans are inching close to advocating complete US disengagement from the global system – UN, World Bank, IMF and all. It’s a worrying trend.

Update: Politico notes how Boehner’s position has hardened over the years.

Boehner now derides the inclusion of IMF cash in the bill, calling it a “global bailout,” despite President Obama’s request that Congress make a down payment on the $100 billion he’s committed to keeping the financial crisis from swamping developing countries, including Pakistan.

That wasn’t Boehner’s tune in 1998, when the Clinton administration requested $18 billion in IMF funding to ameliorate the effects of the Asian financial crisis.

“I have been as critical about the IMF as many, but given the crisis we have around the world, the U.S. needs to provide leadership,” the Ohio Republican told the [Newark, N.J.] Star Ledger in Oct. 1998. “The only real avenue is the IMF.”

His trajectory, it seems, is typical of the whole of his party.

In the world of Bretton Woods watchers such as myself (and what a world that is), all eyes are on the US Congress, where lawmakers are deciding on the fate of President Obama’s commitment at the G20 to boost the US’s contribution to the IMF by $108 billion. There is no doubt that the Fund needs that money (as part of an overall increase of its resources to £750 billion) but things are not going smoothly on the Hill.

Unfortunately, US politics being what it is, the increased funding is part of another bill… an Iraq war financing bill. Of course, this means that Congressmen and women can’t vote for IMF funds without also voting for war funds and can’t vote against war funds without also voting against IMF funds. (And vice versa.) According to Mark Weisbrot:

from the beginning, the administration has faced tremendous obstacles to getting a majority members of the House of Representatives to vote for the money in an up-or-down vote. This is because many members of both parties are afraid that it would be seen as another taxpayer bailout for the financial industry – and foreign banks at that.

So we are left with a state of affairs in which some Democrats are rebelling against the Bill for war reasons, and others because they want moves on IMF reform (particularly in terms of its dangerously austere lending conditions) in exchange for the increasing funding proposed. Few would argue that this is a sensible and eminently just request. However, the US Treasury (which of course has an enormous degree of sway over IMF policy) has refused to commit to this as a condition of the increased funds. Republicans, meanwhile, ostensibly just want the IMF money put to a separate vote. But (Weisbrot again):

Interestingly, the Republicans are not trying very hard to get the IMF money removed. They are not saying anything on television or in the media. This indicates that they may want this money to pass with only Democratic votes, so that they can attack the Dems – especially those in conservative districts – when the money ends up bailing out the European banks in eastern Europe.

Of course, that’s a solid criticism and no doubt it’d play very well. But at the end of the day, this is exactly what the IMF is meant to do, it’s part of what it was set up for and it’s certainly part of the job of a hegemonic country that claims to be ‘ready to lead once more‘.

Courtesy Flickr user massdistraction

The IMF today predicted a grim economic outlook for 2009, with some green shoots in 2010.

The news is especially grim for the UK and Eurozone countries, with a 2.8% and 2% fall in output in 2009 and barely any growth in 2010. The US is predicted to do quite a lot better – a 1.6% fall this year, but 1.6% of growth next. That should cue a pleasant new wave of American triumphalism.

China floats through the crisis more or less unscathed. Growth slips to 6.7% in 2009, but bounces back to 8% in 2010. India does a little worse, Brazil suffers pretty badly, while the Mexican economy really tanks.

But I really don’t know why I even bothered to read the stats. Nine months ago at the Progressive Governance Summit, Dominique Strauss-Kahn told everyone that Europe and the US would experience a slowdown, but not a loss of growth (with the European economy expected to outperform the American one).

Even since it last ran its models in November (just three months ago!), the IMF has knocked 1.7 percentage points off world growth, and a staggering 6 points from its prediction for what were once known as the Asian tigers.

The IMF itself is forced to admit that “the uncertainty surrounding the outlook is unusually large.” Doesn’t that translate as “our models weren’t built for these crazy conditions, but we’ll run them anyway and PR them heavily to the 1000 or so media outlets that’ll reprint our speculation as fact”?

Or am I missing something here?

David Cameron yesterday warned that the UK could be forced to go cap in hand to the IMF, as it did in 1976 under chancellor Denis Healey. (This, by the way, at the launch of a new programme at Demos about ‘progressive conservatism’. Et tu, Demos?)

The question is, would the IMF have the cash. Click on more to read a story I recently wrote for my mag, www.emeafinance.com, which looks at the risk of the IMF running out of money in the next 18 months, and asks what the chances are of it receiving more funds from cash-rich G20 governments (answer: slim).

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