Ksenia Yudaeva, Chief of the Presidential Experts Directorate and the Russian G20 Sherpa, talks to journalists on the third Sherpas' Meeting held in St.Petersburg on May 11-12.
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Question: The third Sherpas' Meeting within the framework of Russia's G20 Presidency has ended in St.Petersburg. What issues were on its agenda? Which of them were discussed as a priority?
Ksenia Yudaeva: The agenda included a whole range of issues, including the latest trends of the global economy. We started thinking of the issues we would like to propose for discussion at the G20 Leaders' Summit. We have come to a conclusion that the economic situation is changing rapidly, and so it would be premature to speak about specific issues at this stage.
However, we have formulated the basic conclusion, which is as follows: economic growth remains a major problem, because it is still low and unbalanced. Some regions and countries are clearly underperforming in this respect, and hence they need a policy for supporting economic growth and creating jobs.
Debates are ongoing about which is more important at the moment: supporting economic growth and demand or fiscal consolidation. However, I believe that the balance is gradually shifting toward the issue of economic growth, which is very important in the short term, and so this is what we should focus on, even though we understand that fiscal issues are very important for some countries because they have no access to the market. Therefore, when considering medium-term issues we should discuss a joint policy aimed at both economic growth and fiscal stability.
We also had a separate discussion of the new elements that appeared among the financial sector issues. One of them has already been discussed for some time and pertains to financial de-globalization. Another issue, which has been discussed particularly actively for the past few days, is the persistent risks of financial bubbles accompanied by reluctance to allocate financial resources for long-term investment. Therefore, when elaborating reforms, we need to look into them from the perspective of ensuring proper functioning of monetary transmission mechanisms, so that funds are used for investment rather than for feeding bubbles. So far, we have more questions than answers, but this can be interpreted as the Sherpas' instruction to the G20 Finance Track to study the issue more in-depth.
Secondly, as I have already mentioned, we discussed the issue of employment, because the G20 Finance and Labour Ministers plan to meet this summer. We discussed preparations for this upcoming meeting and the main decisions that could be endorsed there. We highlighted ways to balance macroeconomic policy for maintaining demand, macro-policies' influence on the labour market, and also a number of specific issues to do with the functioning of the labour market. We need to find the right balance between proposals aimed at improving the supply side of the labour market, primarily proposals for enhancing the skills and educational standards for workers, and with particular attention to the young people, and creating institutions for supporting youth employment on the one hand, and the flexibility of the labour market institutions on the other. We can see that countries which have flexible labour markets have fewer problems with unemployment. However, development will be impossible without improving workers' skills and increasing their productivity. This issue requires special attention.
And lastly, we actively discussed the issue of multilateral trade, monitoring of the protectionist measures, extending the G20 countries' pledge not to introduce new protectionist measures, and most importantly, supporting the negotiating process within the WTO. The current situation is obviously critical, with trust for the global trade system plummeting because of the lack of progress at the negotiations. Therefore, one of our priorities this year is to ensure progress at these negotiations.
In general, I'd like to say that the more we prepare for the Summit, the better we can see that Russia has chosen the right priorities, because economic growth is the issue of the year, and discussions of it are never-ending, and so our key goal is to draft a policy for supporting economic growth.
Question: Each country has its own view of economic problems and the global situation. Did the other Sherpas raise any country-specific issues?
Ksenia Yudaeva: I have outlined the issues we discussed. A matter of a different kind is that some countries' reflection of these issues may differ. For example, the United States' policy on economic growth is focused on maintaining demand. European countries, primarily Germany, agree that maintaining demand is a major goal, but at the same time they view fiscal stability as their priority. As usual, the truth lies somewhere in between and therefore it is very good that we have started searching for a balance between these two poles.
Many emerging economies, primarily India, promote the discussion of the issues of investment into infrastructure. Unemployment is a major issue for Europe. I would say that economic growth has been low and unbalanced, which explains the countries' differences over the key priority. But I believe that they share a common understanding of the general agenda and a desire to move forward. We will see how the situation will develop further when we start discussing concrete measures and proposals for the Summit.
Question: You noted that Russia would convene a Joint Meeting of Finance and Labour Ministers this summer. Is unemployment the reason for holding this meeting?
Ksenia Yudaeva: Unemployment is definitely a major issue. It has been debated that it was partly a result of the fiscal consolidation policy, although a reform of the labour market also has a major role to play in this field. A search for a balance between the strategy of creating jobs and a fiscal consolidation strategy is an issue of crucial importance, which is likely to be featured prominently at the upcoming meeting.
Question: Accelerating economic growth and creating new jobs are among Russia's priorities in the G20. Why is that?
Ksenia Yudaeva: Have a look at the economic data: global economic growth has slowed down, in recent months in particular, and the situation over the past four years can be described as critical. It is not a recession, but it is clearly a very low-growth situation. Low growth has become the new normal.
This is certainly a key priority of the economic agenda, because the G20 was initially created to coordinate the (economic) agenda and to search for joint solutions for the global economic problems. Everyone says that we have chosen the key priorities very wisely, because debates on economic growth and new jobs were among the most heated at the latest Sherpas' Meeting.
Last year we discussed concrete issues of the European debt market and individual countries, but this time we focused on economic growth, because the IMF believes that the global economy is running at three speeds.
Question: One of the issues to be discussed at the Summit concerns sovereign debt. As I understand it, Russia believes that sovereign debt levels and measures should differ from country to country. Could you decipher on this in more detail?
Ksenia Yudaeva: The proposal to compile sovereign debt indicators was initially made in Toronto, where the member countries assumed debt obligations. But back then at the Toronto Summit, it was believed that the worst was left in the past, that the crisis had ended and we would move from stimulating economic growth to fiscal stabilization. Unfortunately, it has come clear now that economic growth is still on the agenda. In many countries, fiscal consolidation, if implemented quickly and right now, could pace down the economic growth.
The United States is very good of an example: its budget sequestration aimed at drastic reduction of the budget deficit is widely discussed nowadays. This proposal is connected with the Toronto obligations, and everyone expects the USA to approve a softer policy for this moment. However, it is also clear that given the level of indebtedness of the industrialized countries, stable growth is impossible without a medium-term strategy of debt and deficit control. So obligations cannot be the same for all countries; each country should draft a concrete strategy that seems to them most appropriate.
I believe that there is a common understanding that we need to both maintain growth and work toward medium-term fiscal stability. But even a balance between these two policies can differ from country to country.