Business Leaders Urge G-20 To Focus On Sustaining Global Economy

27th Jun 2010 18:34

By Caroline Van Hasselt Of DOW JONES NEWSWIRES TORONTO (Dow Jones)--A high-powered group of the corporate leaders urged Group of 20 nations to focus on shaping policies that sustain the global economy rather than respond to populism aimed at punishing business, the Canadian Council of Chief Executives said. They also voiced their opposition to a global bank levy, an issue that has proved divisive within the G-20, which includes developed and emerging economies. About 40 chief executives attended a one-day Business Summit, dubbed the B-20, Saturday to discuss exit strategies for fiscal stimulus, financial reform and what it will take to drive strong economic growth over the longer term. They said their biggest worry is the growing burden of government debt, and they told G-20 finance ministers in a meeting Saturday that they must deal with their fiscal deficits if they hope to restore confidence and drive business investment and economic growth. "Failure to address deficits effectively is now the biggest risk to global economic recovery," said the Ottawa-based council, a think tank, which hosted the event. Governments "must recognize the need for long-overdue structural change," it said. The Business Summit participants came from all G-20 countries and represented various industries, including energy, banking and manufacturing. They included Archer Daniels Midland Co.'s (ADM) Patricia Woertz and Schneider Electric SA's (SU.FR) Jean-Pascal Tricoire, Suncor Energy Inc.'s (SU.T) Richard George, BASF SE's (BASFY) Jurgen Hambrecht and Royal Bank of Canada's (RY) Gord Nixon. "It's time for the recovery to be private-sector led, and for that to happen, governments need to reduce policy uncertainty," the council's head and former Liberal government Deputy Prime Minister John Manley told Dow Jones. Manley said he was surprised at the degree of consensus among the business delegates, who were asked to attend at the request of their respective countries. He said there was little dissent, "more nuance than disagreement." There was a "general sense of optimism" but also recognition that the recovery is fragile, he said. "A plan to reduce and eliminate deficits is not a trade off with future growth, it's a precondition of future growth," Manley said. "The debate (for G-20 leaders) has been framed somewhat differently, but for business leaders, it was: Governments have got to stop this." The delegates stressed the need for clarity as to what the rules of the game will be, Manley said. "This is especially true in the financial sector, where one delegate said 'speed to certainty' is critical," he said. There was no support among the business leaders for a "one size fits all" approach to global financial regulation. Business leaders were also critical of plans to implement a global bank tax to shield taxpayers from the cost of resolving future financial crises. A global bank tax would add to moral hazard, increase systemic risk and undermine both access to credit and improving regulation, they said. In a joint statement last week, the U.K., France and Germany said they were committed to levying a fee on banks, something that G-20 host country Canada has vigorously opposed. The U.K. has said it would introduce its version in January 2011 and that the levy would apply to all of the country's banks and building societies, as well as to British operations of overseas banks. "I heard absolutely no support for the concept of a global bank tax, or for a fund to be available in future crises," Manley said earlier in a statement. In an interview, he said the delegates were agreeable to a tax on banks as part of a package of broader measures aimed at correcting deficits but not as a punitive measure. The delegates urged governments to focus on addressing the key issues of crisis, especially capital ratios, leverage and liquidity. There was also strong support among the Business Summit delegates for breaking the "logjam" of the World Trade Organization's Doha round of trade negotiations, a move that they feel would contribute to a "huge global stimulus package at no cost to governments." The stalled Doha round, which began in 2001, is the longest-running trade talks in the history of multilateral negotiations. They also urged politicians to eliminate barriers to free trade, which encourages innovation and is seen as an important driver of strong and sustainable growth. The global financial crisis precipitated by the meltdown of the U.S. subprime housing market and the ensuing recession have sparked hostility toward business in general, the council said. The crisis has left "a lot of people around the world blaming bankers" for the state of the economy, it added. That has led to populist policies, such as a bank tax, rather than "sensible" ones aimed at promoting economic growth, the council said. "If governments really want the private sector to create jobs, they have to move on to the next stage, not play the card of name-blame and punish," says Manley. Council Web site: http://www.ceocouncil.ca/en/ -By Caroline Van Hasselt; Dow Jones Newswires; 416-306-2023; [email protected] (END) Dow Jones Newswires June 27, 2010 13:34 ET (17:34 GMT)