State of play at lunchtime

OK, just had chats with a couple of senior UK officials, and here’s where things are at inside the negotiations:

– Lots of discussion about SDRs and IMF finance.  It looks like we’re heading towards a $250bn SDR issue as part of a larger package on IMF financing; things look hopeful for getting beyond the important $500bn level.  Germany has apparently been a bit difficult over the SDRs issue – they’re keen on applying a lot of conditionality.  The SDR discussions were also complicated by China’s recent suggestion of ending the dollar’s role as global reserve currency, and using SDRs instead – this made the US somewhat suspicious of SDRs in general.

– A big fight is underway on tax havens. Sarkozy’s going in hard for tough language, but China is against as it’s worried about the effect on Hong Kong and Macao.  Gordon Brown is looking for a compromise on that right now at the lunch.  The Czech Presidency has been ‘unhelpful’.

– On trade finance, there are hopes for a pretty good package, which would then be presented as a key outcome for low income countries.

– But it looks like today’s big disappointment will be on climate change and green new deals.  Both sources told me that there will be no numbers at all on green new deals, either in terms of percentages of stimulus packages, or overall dollar totals.  Worse, there are real struggles underway on keeping language about Copenhagen in the communique at all.  The issue here is apparently largely with China – which is reportedly worried about linking climate and the G20 process, on the basis that this would provide Congress with another platform for protectionism. Right now, all language on “greening”, “low-carbon” and “Copenhagen” is out of the communique, at China’s request.

That’s it for now.  As ever, apply a discount rate to all this: this is about the time you’d expect host government officials to be lowering expectations, so that they can pull a rabbit out of the hat in about an hour’s time…

The other crunch: food prices

Although the food price crisis has slipped from the agenda as the credit crunch has gathered pace, for poor people around the world it hasn’t gone away – and may now be set to worsen again. 

While the FAO’s food price index has fallen by around 30% since its peak last summer, that only takes it back to May 2007 levels: still well above recent norms.  Meanwhile, the global total of undernourished people is now over a billion, up from 850m just a couple of years ago. Now, FAO officials say privately that they expect the next findings from the index to show a new increase. 

If that’s right, then we’re really moving in to worst case scenario for developing countries, who are already reeling from the credit crunch. So what’s happening here at the London Summit on this front?

I asked that to Douglas Alexander, the UK’s international development secretary, in a press conference he did an hour or so ago.  He pointed to the £200m the UK has committed to a new ‘rapid response social fund’ to provide safety nets for the most vulnerable people, and applauded the work of the World Bank and WFP in particular. On increasing supply, meanwhile, he suggested that infrastructure investment is crucial (which it is).

I also caught up with Peter Mandelson, the UK’s business secretary, and asked him how the trade system could be proofed against the kind of crazy security of supply perturbations that caused such problems last summer, when over 30 countries had export restrictions in place. He stressed that what’s needed is to keep markets open, and that any impediments to this would harm supply by undermining incentives.

In analytical terms, I can’t fault anything either of them said. But note the lack of specifics about what this summit should be doing: there’s no getting round the underlying fact that preventing a resumption of the food price spike isn’t on the agenda here.  It should be.  As a senior IMF official put it to David and I when we were over in DC recently: “the last thing we can afford now is another crisis creeping up on us”.

Leaders chill out

Alex Barker at the FT’s Westminster blog:

This is my first dispatch from the G20 media hangar, which has so far proved to be full of journalists and free of information. But Britain’s intrepid press pack have succeeded in digging up one important story: the “minty green” colour of the “lounge area”.

We’re told that the world’s leaders will be plotting the course for economic recovery from a modern, functional, informal “break out zone”. There are comfortable chairs and tables, but “no bean bags”, according to one well informed source.

Leaders left breakfast a short while ago (the menu remains top secret) and are now “milling around”, chewing the fat and bargaining over the world’s future. Here’s to hoping the coffee is better than it is in the press area.

Actually, an informal ‘break out zone’ is probably a good idea.  Watching the TV feed of the formal summit room a couple of minutes ago, I couldn’t help wondering how any kind of shared awareness could emerge from such stilted surroundings…

Unexploded bombs, and other G20 excitment

So here I am in the cavernous media centre at the London Summit.  Some of the main excitement of the day so far: (a) the police found an unexploded World War Two bomb sunk in the dock next to the Excel centre, and will be detonating it shortly; and (b) there are free bacon sandwiches.

Plus, it turns out that one of the other G20 voice bloggers is Daniel Kaufmann – now at the Brookings Institution, before that at the World Bank.  He’s one of the top governance experts in the world (the FT’s words), and was one of the World Bank staffers who really put pressure on Paul Wolfowitz during the 2007 graft kerfuffle – if you recall the letter that he and other Bank staff sent to Wolfowitz, it read

The credibility of our front-line staff is eroding in the face of legitimate questions from our clients about the Bank’s ability to practise what it preaches on governance.  In these circumstances, we cannot credibly implement the governance and anti-corruption strategy.”

Hats off for that.  Next up: bloggers’ press conference wit Douglas Alexander coming up shortly.

More Chinese big ideas

Earlier this week, I did a post on Chinese central bank governor Zhou Xiaochuan’s essay calling for the replacement of the dollar as the world’s reserve currency.  Today’s FT contains another instalment of big picture thinking from China on the global economy – this time from Yu Qiao, an economics professor at Tsingua University’s School of Public Policy and Management.

Like Zhou, Yu is explicit on Chinese worries about the potential erosion of the value of their rather large stash of US dollars – $1,200 billion of T-bills alone.  “Most of Mr Obama’s stimulus spending is devoted to social programmes rather than growth promotion,” he notes, “which may exacerbate America’s over-consumption problem and delay sustainable recovery”.

What’s more, he continues, that could in turn end up doing exactly what Tim Geither was worried about in the wake of Zhou’s essay: an erosion of the dollar’s role as reserve currency.  Here, interestingly, there’s what looks like a signal of preparedness to moderate the position set out in Zhou’s essay. Yu says explicitly that,

No other international monetary system offers a viable alternative. However, we can make the main reserve currency power more accountable by creating an instrument to help manage the global crisis.

Admittedly, Yu is an academic and not a member of the government.  But it’s very hard to imagine that a senior Chinese professor would directly contradict his government’s position, on such an acutely political issue, in a time of such severe risks, in the FT, the day before the G20 summit, without clearance.  At the same time, using this approach avoids losing face for Zhou – and may signal a willingness to talk, rather than a definite climbdown.

So what does Yu propose as an alternative way of safeguarding China’s assets, if not reform of the dollar’s reserve currency role?

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NGO photo-op of the week

As well as looking out for the pointless initiative of the week to emerge from the London Summit, another important contest to keep an eye on is NGO stunt of the week. 

In that vein, please doff your hats (so to speak) for Paul Hilder, campaigns director of, who takes an early lead in managing not only to persuade the IMF’s Dominique Strauss-Kahn to accept Avaaz’s petition – but also in retaining a straight face while doing so in a very fetching green hard hat.

Paul is now here at G20 Voice with me and still in possession of said hard-hat, so he seems to be growing quite attached to it.  (Either that or it’s all kicking off outside…)