When Nicolas Sarkozy launched the French presidency of the Group of 20 leading nations, he picked the slogan “New World, New Ideas”. His ambition was to transform Cannes into a new Bretton Woods, as the summit would redesign global economic governance and the international monetary system. However laudable, these projects should be delayed for better times. With the markets in turmoil and the eurozone in danger of collapse, this can only be a time for short-termism.
As was made clear this week by the Organisation for Economic Co-operation and Development, uncertainties over the short-term outlook for the world economy have risen dramatically in recent months. Business and consumer confidence have weakened, investment decisions are being postponed and household spending is suffering from lower asset prices and a sluggish labour market. The OECD expects near-term growth of gross domestic product will be weak in the US and may turn mildly negative in parts of the euro area. Even emerging market economies will experience below-trend growth rates.
Much of this gloomy outlook is due to weak policymaking. As Congress squabbles over a deficit-reduction plan, just as it argued over the debt ceiling, the US has done its best to claim the Golden Palm at Cannes for the most incompetent decision-making. However, the eurozone leaders have stolen this unenviable prize by letting the Greek debt crisis get so out of hand that it now threatens the integrity of the eurozone. This is a mistake that historians will look back on with contempt.