The 2010 G20 Summit begins today in Toronto, Ontario in Canada. Leaders from the top economic countries in the world will discuss the global economy. The key issue at hand is the best course to improving growth: more stimulus or austerity? The Debt Contagion ravaging Europe is forcing many nations to reducing their free-spending ways. President Obama is encouraging them to continue a policy of more stimulus, even though the trillions already spent has little to show for it.
Tax increases will also be on the table. Again, most of Europe has begun to increase taxes in addition to spending cuts in order to balance their books. While such a move may spark a double-dip recession, the hope is to avert a far greater disaster of a full-blown depression caused by excessive debt and currency collapses.
One leader not attending the Toronto G20 Summit is newly appointed Australian Prime Minister, Julia Gillard, Australia’s first woman PM. She replaced Kevin Rudd, who stood down several days ago after losing support from his party and from the public in general. Rudd back-tracked his position on a carbon tax, and proposed a massive 40% tax on ’super-profits’ earned by the coal mining industry. The fervor this caused led to a late night caucus session of the Labor Party which forced him to step down. Gillard has decided not to attend the G20, and instead shore up support within her party. Many suspect that her tenure may be a short one, as she has agreed to elections next year.
The G20 Summit has already created a stir in Toronto. Police have made two arrests of suspects with weapons, including items which could possibly be used to build an explosive device. Security is tight, costing over $1 Billion dollars as some 10,000 police from across Canada keep protesters away from the world leaders. The last major international summit in Canada, the APEC meeting in Vancouver was marred by huge clouds of pepper spray as police tried to break up WTO protesters. This lead to an embarrassing comment by then Canadian PM, Jean Chrétien, who answered a reporter’s question about the use of mace with, “For me, pepper, I put on my plate.” Since Monday, additional powers have been extended to the police in Canada, causing many to be concerned as the city of Toronto is now in a lockdown state.
President Obama is expected to call for more spending to stimulate the global economy. However, several leaders, including German Chancellor Angela Merkel and the new UK Prime Minister, David Cameron, have stated they will resist such a move. Merkel even joked about teaching Obama a lesson on economics. China and the unpegging of their currency, the Yuan, may also be an issue. Obama has been wanting China to do so for over a year now to improve U.S. exports. However, the decision may backfire if China decides not to spend their now stronger Yuan on buying bonds from those nations which are deep in debt, such as the United States. China has already slowed down it’s purchases of U.S. Treasuries, and has less exposure now than a year ago.
Many other issues will be discussed at the 2010 G20 Summit in Toronto. Global warming, carbon taxes, petroleum use are expected to be raised. Some speculation that the summit may see a confrontation between Obama and Cameron over the BP oil spill. BP is a vital company for the UK, with one in six pensioners deriving income from their stock. Speaking of stock, another key item will be new regulations on trading markets and banking practices. Bond and derivative trading as well as paying down toxic assets will take the front stage during the G20 Summit. As will entry of Russia into the WTO. The three-day conference will end Sunday and we can expect several joint statements to be made on the results of the summit.