‘Group of Four’ takes global economic reins

By Stewart Fleming

Date: 16/06/05

Senior finance ministry officials from the world's four major currency blocs, the US, Japan, China and the eurozone, have been meeting to discuss the threat to the global economy from current account imbalances and currency movements.

The meetings are a tentative step towards the emergence of a 'Group of Four' (G4) forum for broad international economic policy negotiations, which might supplant the current Group of Seven (G7) advanced industrialised countries. The G7 is increasingly criticised for being too unwieldy and having too many European members.

The emerging G4 reflects the increasing importance to the stability of the world economy of rapidly emerging market economies, such as China, and the diminishing role which G7 meetings on their own are able to play.

Traditional members of the G7 such as the UK and Canada have been excluded from the meetings of senior G4 officials representing the major currency blocs, while the other European G7 countries, Germany, France and Italy, have participated only indirectly as members of the Eurogroup, the meetings of eurozone finance ministers.

Commenting on the embryonic G4, a European official, who did not want to be identified, said: "First of all, formally, the G7 continues to be the G7. The views of the Chinese are known and sometimes the Chinese are attending as guests, so, in any formal sense nothing has changed with regard to that."

But, he went on: "There is informal communication between the interested parties which takes place in different forms. Some is bilateral, some is trilateral and some is quadrilateral I cannot exclude that some discussions have taken place that involve four parties also many discussions take place that include only two or three parties." He stressed, however, that "I do not think we have a formal G4".

The new G4 meetings, even though they are held by officials below the rank of finance minister and are informal, highlight the diminishing influence of advanced industrial countries like the UK and Canada.

Asked whether Britain's exclusion from the embryonic G4 talks implied it was paying a price for not being a member of the euro club, a senior EU finance ministry official said: "Yes."

A former top US Treasury official said that such simultaneous face-to-face discussions between senior officials of the major currency blocs was a new development.

Hints at the way the architecture of international financial diplomacy is changing came on Tuesday (14 June) from Caio Koch-Weser, Germany's deputy finance minister.

Koch-Weser is president of the Council's economic and financial committee, the committee of EU officials which is increasingly devoting its resources towards the preparation of Eurogroup, rather than the Ecofin Council of finance ministers from the EU25.

He told the European Parliament's economic and monetary affairs committee that recently the G7 itself had in certain circumstances "worked almost like a G3", in bringing together the US, Japan and the eurozone to prepare public statements.

"We increasingly include China in our dialogue but this is not so much for the public arena," he added.

Jean-Claude Juncker, the Luxembourg prime minister and finance minister who is also chairman of the Eurogroup, last month dropped a strong hint that the G7 finance ministers' forum was proving unwieldy. Questioned about the G7 at the informal Ecofin Council in Luxembourg, he said: "There are too many finance ministers in the room to really use this forum for effective discussion."

Asked what he would change, Juncker said that he would "start by rationalising the representation of the euro".

Article reports on a meeting of senior Finance Ministry officials from the world's four major currency blocs, the US, Japan, China and the eurozone. On the agenda were the threat to the global economy from current account imbalances and currency movements. Author suggests that the meeting was a tentative step towards the emergence of a 'Group of Four' (G4) forum for broad international economic policy negotiations, which might supplant the current Group of Seven (G7) advanced industrialised countries. The G7 was increasingly criticised for being too unwieldy and having too many European members.