The G7s days as the worlds leading body for
steering economic policy appeared to be numbered last night,
after leading policy-makers said it was close to
Speculation that finance ministers might not issue even a
communique after their meeting today was denied, but reflected
The G7 is not quite dead, but it is losing its
relevance, Dominique Strauss-Kahn, IMF managing director,
told Emerging Markets in Istanbul yesterday. Its on
its way to extinction.
He said that the G7 Canada, France, Germany, Italy,
Japan, the UK and the US had issued boring
communiques that ministers failed to follow up.
The future of the G7 was put into doubt by the leaders of
the G20 countries including China, Brazil and India
who used their Summit in Pittsburgh last week to
designate the new body as the premier forum for our
international economic cooperation.
Strauss-Kahn said that he expected that G20 leaders would
follow up their meetings especially regarding new
regulations and the new supervision of the financial
Financial markets were rife with speculation yesterday that
the G7 finance ministers would not even issue a statement at
the end of their meeting this afternoon. Countries were
debating the issue as late as Thursday.
I think it is not yet decided, a spokesman for
the UK Treasury said on Thursday night. It is a matter
for the Italians [who will chair the meeting].
On Wednesday US Treasury officials were reported as saying
that the issue was under discussion, although last
night a French official was reported as saying there would be a
The confusion only added to the feeling that the grouping is
redundant. Mark Williams, an economist at Capital Economics, a
London-based think tank, said dropping the communique would
mark a decisive shift of power from the G7/8 to the
The communiques have increasingly been ignored by markets
since 2004, when ministers attempts, at a meeting in Boca
Raton, Florida, to influence a fall in the dollar against the
renminbi were undermined by the fact that the Chinese were not
at the discussions.
However Bill White, former chief economist at the Bank for
International Settlements, warned that the shift to the G20
would dilute efforts by Europe and US to encourage Asian
exporters to appreciate their currency. He told Emerging
Markets that the G7 at least discussed global
When you think that the fundamental international
architecture of economic policy-making [the G20] wont
discuss exchange rate issues one of the factors that
lead us to this crisis is worrying, he said.
Chinas managed exchange rate has been criticised for
triggering the crisis, by fuelling US consumption and bringing
down global interest rates to create asset bubbles. To
say that China is a member of the team but you cant
discuss the rules [for global economic governance] in the G20