GORDON BROWN is good at putting on a brave face when confronted by disappointing news. It is just as well. The Chancellor must have found the events of the past weekend’s meetings of finance ministers and central bank chiefs from the Group of Seven rich economies profoundly frustrating.
The tirelessly ambitious Mr Brown has spent weeks in detailed diplomacy and painstaking groundwork to try to ensure that the G7 talks he chaired in London emerged as a triumphant staging post in Britain’s campaign to bring relief to a stricken Africa. He even drafted in Nelson Mandela to bend the ears of his fellow ministers.
Then, on the very eve of the gathering, America delivered the bitter blow of sending a substitute, John Taylor, in the place of its Treasury Secretary, John Snow. Worse still, the substitute then delivered a blunt US repudiation of the Chancellor’s key proposals within hours of arriving in London. On Friday night, Mr Brown's grand designs appeared to be coming apart at the seams.
By the close of the talks on Saturday, though, a compromise had been cobbled together. A weary-looking Chancellor took to the stage in the auditorium of London’s Queen Elizabeth II Conference Centre to make the best of it, hailing what he called a landmark deal.
But while Mr Brown may desperately want to think of the G7’s communiqué as the “Lancaster House Agreement”, after the London venue where it was hammered out, a more accurate name might be the “Lancaster House Disagreement”.
The Chancellor, as ever, deserves marks for his persistence. In the face of the weekend’s fractious arguments over what action to take to help Africa, a less determined politician would simply have given up.
Probably, only the famous Brown obstinacy managed to produce what did emerge from the talks — a programme for further research and negotiation through the spring which the Treasury optimistically regards as an “action plan”.
Certainly, Mr Brown has extracted from his counterparts a new commitment to debt relief, with agreement that the world’s poorest nations should have as much as 100 per cent of their liabilities written off. In the circumstances, that was an achievement. But note that, thanks to Japanese intransigence, the G7’s pledge is for “up to” 100 per cent relief. Note too that at the somewhat teutonic insistence of the unenthusiastic Germans, this will be now be considered only on a case-by-case basis.
The reality is that while the G7 now agree that something must be done about Africa, they remain deeply divided over what. Saturday’s communiqué embraces the need to take action and to provide more resources. But it fails to even hint at a deal by which these objectives can be achieved. It merely papers over the diverse positions of the different G7 members by committing them to look at every idea cast upon the table: British, American, Japanese, and French.
There is no consensus and much conflict. Like the separate realities of Africa and the West, the competing approaches taken by G7 members remain worlds apart. No amount of rhetoric can bridge the gulf.
For Mr Brown and Tony Blair, this presents a huge challenge and a cause for huge anxiety. A fortnight ago, in Davos, Mr Blair spoke of how his fellow world leaders had described Britain's ambitious agenda for its G7 presidency, covering both Africa and climate change, as “courageous” — code, the Prime Minister explained, for politically suicidal. After the past weekend, the agenda looks even more courageous than it did.
Time is running short if Britain’s presidency is now to deliver tangible results for Africa worthy of the vaulting ambitions espoused by the Government. With the G8 summit of G7 leaders plus Russia’s President Putin set for July, the Treasury and No 10 need to make substantial progress on the nitty-gritty of real proposals (and real cash) by the spring. If Saturday’s “action plan” does not germinate into action by the time Mr Brown gathers again with his counterparts at April’s meetings of the International Monetary Fund then the chances of summit failure will greatly multiply.
Sitting alone, symbolically isolated, on a vast stage at the conference centre at Saturday’s final press conference, Mr Brown could only have reflected on the scale of the task he now confronts. Africa’s poor, meanwhile, can only wait for some scraps to emerge from the fighting among the world's richest countries.
- THE weekend’s relative inaction on Africa among the G7 was mirrored by its inactivity on other fronts, notably on the important matter of foreign exchange policy and the direction of the enfeebled dollar.
At least in the case of the dollar, the G7’s stasis was caused, in part, not from disagreement (although the group is scarcely united on the issue) but from a sudden outbreak of optimism.
On Friday, Alan Greenspan struck a surprisingly reassuring tone over the global risks posed by the depreciation of the US currency in the face of America’s burgeoning current account and budget deficits.
For the Federal Reserve Chairman, the moment has arrived when a benign combination of market forces, alongside Washington’s efforts to curb its spending and borrowing binge, may start to correct the US current account shortfall and to stabilise the dollar.
Well, perhaps. But for many observers, Mr Greenspan sounded a touch too sanguine, even if it is unclear whether he is truly more confident or simply attempting to soothe others in the face of his own, private anxieties.
In any case, this week could see significant short-term tests of whether we are embarking on a period of greater dollar stability or not. With the latest Fed increase in US interest rates now lending some extra support to the greenback, December trade figures are expected to show some narrowing in America’s trade gap, which could give the currency a further modest boost.
More crucially, however, Washington will today kick off its Budget-making process when President Bush sends his spending plans to Capitol Hill. Economists regard it as critical to arresting the dollar’s decline that the President’s commitment to cutting the $400 billion (£215 billion) US budget deficit by half over four years should be seen as full-blooded by the financial markets.
At the G7, a senior US official insisted that not a single voice of doubt had been raised on this question during the weekend talks. Presumably, this was because the official had turned a deaf ear to Mr Greenspan’s subtly sceptical tone on the issue.
Capital Economics estimates that even if the US Government’s discretionary spending is restricted so that it rises only in line with inflation, a considerable challenge, the budget deficit will still stand at $370 billion, or 2.6 per cent of GDP, by 2009.
The Administration wants to see discretionary spending rise even more slowly but its ability and willingness to deliver this in the face of America’s pork-barrel politics remains in doubt. As the budget process unfolds over coming months, the scale of such doubts will play a decisive role in the dollar’s fate.
