Why has Gordon Brown apparently gambled his reputation, and based his political survival plan, on a meeting of 20 world leaders in London on 2 April, the outcome of which is beyond his control?
As Brown toured Europe, the United States and South America in a final push to secure his “global new deal”, some of his own ministers expressed private fears that he has overhyped what can be achieved when the G20 leaders dodge the demonstrators and meet for one day at the ExCeL centre in London’s Docklands on Thursday. “The difficulty that is now emerging in relation to the G20 is that it is simply too ambitious,” said Stephen Byers, the Blairite former cabinet minister. “An exhaustive agenda has been put forward that tries to do too much.”
Labour backbenchers moan that there are “no votes” in the G20 meeting, saying Brown has not made clear to ordinary people suffering in the recession the link between it and their concerns. They wonder why he has invested so much energy – and hope – in it.
There are signs that the Prime Minister is now trying to lower expectations. He no longer talks about “a new Bretton Woods” agreement. Instead of creating new global financial institutions, the onus in London will be on doubling to $500bn the budget of the International Monetary Fund so it can bail out countries that get into trouble. His more recent talk of a “grand bargain”, in which the United States backed immediate reforms to financial regulation in return for a further fiscal stimulus by European nations, has been rebuffed by the Europeans, led by Germany.
So is Brown riding for a fall? Not necessarily. There will be an agreement at the London summit. Failure to approve one would have a catastrophic effect on the financial markets, compounding the very problems all the leaders need to solve. Much of the London deal will have been precooked by the “sherpas” – the officials who map out a path for their leaders and narrow their differences ahead of such events. Countries such as China do not negotiate in “real time” while locked in a room with other leaders.
The critical question is how substantial the London agreement will be. This is where it gets tricky for Brown. By initially talking up the meeting, he may have doomed it to fail in the eyes of the largely hostile British media, which will be looking for tensions, divisions and disagreements. They may not be satisfied with “the new consensus” Brown hopes to forge: on the need to do everything necessary to combat the global recession (including a further fiscal stimulus where appropriate); a declaration in favour of free trade and against protectionism; outline agreement on tougher regulation for the financial system, including a crackdown on tax havens; bringing hedge funds under the regulatory net and recognising that pay should not incentivise risk; ensuring a “low-carbon recovery”; and not reneging on promises to aid the world’s poorest countries (although some rich nations have not kept such pledges in the past). Critics, including some businessmen and ministers, believe Brown should have focused more on ending the recession and left issues such as tax havens, hedge funds and bankers’ pay until another day. Having such a wide-ranging agenda, they fear, will result in the agreement being worthy but vague.
In Downing Street, the word is that what matters is not the inevitable reaction of the sceptical media, but the measures to which the 20 leaders sign up. Aides insist that the Prime Minister was right to raise the summit’s sights. To some extent, Brown couldn’t win. He didn’t call this conference. It happened to be Britain’s year for chairing the G20, a group which operated at the level of finance ministers until November, when the global crisis persuaded the 20 national leaders to gather in Washington. It could now become a permanent successor to the G8 group, allowing the likes of China, India and Brazil into the rich men’s club.
“If we hadn’t raised the bar high, other countries would have had little or no pressure on them to give ground, and the media would have said it was a damp-squib summit,” one Brown aide said. “If you don’t aim high, you don’t achieve much.” A cabinet minister added: “You can never get this balance absolutely right: it’s impossible.”
British officials described the pre-summit negotiations as “complicated” and “very difficult”. One talked of “20-dimensional chess”, before adding that it was even more complex than that, because one of the G20 is the European Union, which represents the 23 EU members not in the G20 in their own right – as Britain, France, Germany and Italy are.
If it were only about 20 people agreeing in a room, it would be a lot easier. But the leaders will want to play to their own domestic galleries. In the middle of a recession, they will not want to look as though they have changed their policies
because of pressure from other countries. Angela Merkel, the German chancellor, has an election to fight this autumn. India will hold a general election over April and May, which will make it impossible for the summit to resolve Delhi’s trade dispute with Washington, a dispute that has scuppered a new global trade agreement. The most that can be expected in London is a promise not to indulge in new protectionist measures.
When Germany reacted coolly to recent US pressure for a bigger fiscal stimulus from EU nations, it became a full-scale transatlantic row. And Berlin’s response was seen as a snub to Brown, even though, as the man who must play the role of honest broker, being the summit chairman, he has not declared his own hand.
Brown’s private discussions in the margins of the EU summit in Brussels on 19-20 March led him to believe that, whatever their public scepticism, other EU leaders have not ruled out giving their economies a further boost. Mindful of Germany’s culture of fiscal responsibility, Merkel will not lead calls for another stimulus, but she might agree to one if pressure mounts from business and the unions. Last December’s EU summit was overshadowed by an Anglo-German row on the same issue, but Germany adopted a second, much bigger, fiscal stimulus soon afterwards. So British ministers argue that the London summit should not be measured by the state of German fiscal policy on 2 April.
Nicolas Sarkozy, meanwhile, is in the midst of street protests and strikes over his economic policies. There are fears among the British that the hyperactive French president may hold back in London because he is not running the G20 show, in contrast to the way he led from the front when he held the EU’s rotating presidency in the second half of last year.
Brown’s allies are arguing that the G20 meeting should not be judged as a one-day event. “We never expected leaders to turn up and rewrite their own budgets on the spot. It is about the wider message you send,” one said.
That the meeting is even taking place has been a catalyst: it was no coincidence that Switzerland agreed to relax its bank secrecy rules just before G20 finance ministers gathered on 14 March. “It is not about pulling rabbits out of a hat on the day,” one Downing Street adviser insists. “The meeting has already made things happen. It has created the momentum for an emerging global consensus on monetary and fiscal policy and financial regulation. The differences around the edges are small.”
Brown is already looking beyond the G20 meeting. He told the European Parliament on 24 March that President Obama and the EU can now forge “an unstoppable progressive partnership to secure the global change the world needs”.
Close allies insist that Brown will focus on the domestic agenda once the G20 show is over, and that he knows the Budget on 22 April will be much more important to his chances of staging another political fightback. “He has not staked all his chips on a one-day summit,” one said. “He will move on quickly. He has still got a lot of chips left.” l
Andrew Grice is political editor of the Independent