Leaders face 'ambitious path' at G20 in Seoul

The International Monetary Fund, the Washington-based intergovernmental group overseeing the world's financial system, said on September 10 in a G20 "surveillance note" that downside risks to global recovery hard increased but maintained its official forecasts of 4.6 percent growth in the global economy as measured by Gross Domestic Product and 4.3 percent growth in 2011, compared with a decline of 0.6 percent in 2009.

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In 2010, advanced economies represented within the G20, which include the United States, the Euro area, Japan and the United Kingdom are expected to grow at a slower pace than emerging and developing economies, such as China, India, Russia, Brazil and Mexico. The advanced vs emerging and developing growth rates are 2.6 percent and 6.4 percent, according to the IMF World Economic Outlook report released in July.

G20 countries agreed in June to follow through on "fiscal stimulus" meant to boost economies at the height of the most recent financial crisis, which took the form of increased spending and tax break across various regions around the world. Part of the G20 commitment also included "fiscal consolidation" plans in advanced countries involving policies to reduce government deficits and debt.

Advanced economies vowed in June to at least halve their deficits by 2013 and stabilize or reduce government debt-to-GDP ratios by 2016. Such economies would also take action to boost national savings but not at the expense of open markets and boosting export competitiveness.

"We recognize that these measures will need to be implemented at the national level and will need to be tailored to individual country circumstances," the countries said in June.

Measuring progress on those commitments is taking place at the country and European level to identify additional measures.

Javier Solana, a former high ranking policy official at the European Union, said in a column on September 8 that the "imprecision" of the agreements in June "has left political leaders with a bitter taste in their mouths."

He noted that while the U.S. favors continuing stimulus, the European Union favors consolidation. The U.S. is still facing a high unemployment rate, with the Obama administration proposing additional spending while the European Union has been faced with a debt crisis in Greece that is requiring tough austerity measures, such as immediate cutbacks in government spending to support near term promises of deficit reduction.

"It is not a question of stimulus versus deficit. Both are necessary," he said. "Even respecting the idiosyncrasies of each context, there is still sufficient common ground for more precision in the agreements."

Other controversies in correcting imbalances are also likely to take place, especially the political volatile situation involving China's currency undervaluation. U.S. Treasury Secretary Timothy Geithner told U.S. senators this week that he would use the G20 summit to mobilize trading partners to let the Yuan rise faster, even as pressure grows domestically to impose more punitive legislative measures. China has resisted sharp moves in the Yuan, citing the recent economic crisis. It recently relented in June but the gains in its value have been "too slow," according to Geithner.

Indian Finance Minister Pranab Mukherjee spoke generally about the need to keep international trade and avoid protectionism. The move may have been an indirect criticism of recent U.S. policy to raise its specialty foreign worker visas, known as H-1B visas, as well as the L-1 variety which allow foreign workers to relocate to the U.S. The U.S. has used recent fee hikes to fund domestic programs.

Another item on the agenda could be to make at least some progress on a global trade deal, related to the so-called Doha round which has been languishing without an agreement since 2001.

World Trade Organization chief Pascal Lamy said this week that he doesn't expect an agreement before the end of the year but made a quick one day visit to South Korea this week to speak to its President and the chief organizer of the Summit to express his concern.