G20 growth pledge easier in the making than the execution

Sun Feb 23, 2014 11:37pm EST
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By Wayne Cole

SYDNEY (Reuters) - The Group of 20's proposal to lift economic activity by 2 percent over the next five years has so many holes in it, there's no wonder it was the first official target that all members felt happy to agree on.

Each country has until November to come up with its own supposedly "concrete" plans, but there is nothing to enforce their implementation except the moral suasion of other members. The International Monetary Fund has said it will be watching for progress on the plans, but it has no power to compel or punish.

The target is also a moving one, as it is based on beating an estimate for growth which itself is just a best guess. Forecasting is by its nature a highly imprecise art and the IMF is forever revising its forecasts up or down. Predicting growth for the next quarter is tough enough, no matter over five years.

"We're not even sure where we are now on growth. How will we be able to judge if these targets are being met?" said Michael Blythe, chief economist at Commonwealth Bank of Australia.

Indeed, the Germans were reluctant to sign up to any hard target at the G20, but accepted the growth goal because it was not binding. Others also stressed it was an aspiration, not a locked-in promise.

"The results of this process can not be guaranteed from politicians," German Finance Minister Wolfgang Schauble said after the deal was signed on Sunday.

And financial markets took little notice of the agreement, instead focusing on Monday on the same concerns they had on Friday -- the impact of the U.S. Federal Reserve's taper of its stimulus and uncertainty over China's economic performance.

LONG LIST   Continued...

French Economic Minister Pierre Moscovici (C) speaks alongside France's Central Bank Governor Christian Noyer and General Director of Treasury Ramon Fernandez at the G20 Central Bank Governors and Finance Ministers annual meeting in Sydney, February 23, 2014. REUTERS/Jason Reed