G20 is the group of the wealthiest and most powerful economies in the world that aims to tackle key issues facing the global village through regular conventions and summits of its leaders. The most recent summit held last weekend in Toronto saw heads of states come together to forge a way ahead.
Top on the agenda was consolidating much of the gains in the economy. Though still shaky, key emerging markets, China, India and Brazil have progressed fairly well since the recession. Real GDP growth in China was almost 12 percent in the first quarter and 9 percent in Brazil.
Advanced economies - Canada and Australia - are also making progress, but recovery in the US is still not on firm grounds and the Euro zone has continued to rattle financial markets with its debt storm in recent months.
World leaders agreed in principle to halve their public debt by 2013 - i.e. in the next two years. However, no concrete actions were decided. And while US, Canada and Germany were on board with the proposal, French President Nicolas Sarkozy pointed out that "these are goals not instructions from the G20 community".
US deficit, for one stands at 10 percent of GDP, slashing it down to 4.2 percent is going to be a superhuman task, and probably the toughest challenge for the Obama administration.
Still, the American President called for a slow and cautious cut in stimulus spending, while German Chancellor Merkel cautioned that "moving too slowly could produce unsustainable debt loads, higher interest rates and even defaults", according to the Wall Street Journal.
Financial sector reform was another key theme at the event. Since the 2008 recession, leaders across the globe are increasingly cognizant of the need for stability in the international financial system. The communiqué from the summit included creating a system that is free of moral hazards.
Currency flexibility was perhaps the greatest present China could offer the West. President Obama, in a post summit press conference, hoped that Beijing would follow through with its promises, encouraging export oriented countries to develop their own consumer bases. "No nation should assume its path to prosperity is paved with exports to America," said the US President.
While leaders from Islamabad were not invited to the conference, they may be able to pick up a thing or two from the weekend summit. First, fiscal austerity is the most important theme in the world at the moment. Governments around the world are aiming to halve deficits, and that could be a cue for Dr. Shaikh and his men.
More importantly, President Obama demanded Chinas help in rebalancing the world economy. Isn it ironic that Islamabad is reaching out to America at a time when Washington is reaching for Beijings help?
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