Can the G-20 Save the World?

Can this illustrious group fix the world? Will it manage, in a single day, to solve the problems associated with risk that has been building for years? Who is going to save capitalism? What needs to be done? And by whom?

There are no longer any easy answers. There are only difficult questions brought on by a crisis that ballooned to such massive proportions that it changed the world, within an extraordinarily short amount of time, in ways that no one would have thought possible.

Serious Conflict Emerging

Since the American real estate market collapsed and the international credit markets plunged into an unprecedented crisis, financial policy, among other things, has been in disaster mode. Governments have saved one bank after another from failure, flooded the markets with cheap money and assembled economic stimulus packages worth billions. But now, just as they are about to come together in London to coordinate the next steps, serious conflicts are emerging.

The conflicts revolve around issues like control over the international financial markets, the relationships among the world's key currencies and determining what economic policy is both acceptable and fair to everyone.

Despite the fact that we now have a globalized economy, the world still lacks a global policy. And, as was the case 76 years ago, there are already gaping differences among the approaches favored by the major blocs.

The new US administration wants to combat the crisis with government stimulus programs, at a cost of trillions, paid for with new debt. We must "fill this enormous hole in global demand," says Obama.

German Chancellor Angela Merkel, on the other hand, is strongly opposed to increasing government debt with additional economic stimulus programs. She favors restraint and aims to convince the other heads of state and government of the benefits of a legal barrier to excessive debt. As she said last week, she would like to "transfer" this idea "to the rest of the world."

Threat to Wall Street

The two leading Western economic powers disagree on another issue as well. To avert another financial crisis in the future, the Germans want to see tighter controls imposed on international financial markets. The United States, for its part, will ultimately refuse to accept any regulation that will pose a threat to Wall Street.

The conference is also burdened by the fragile personal relationship between the two protagonists. Merkel is dealing with a president with whom she has not yet been able to connect. Although the two leaders agreed last week to a joint approach to fixing the problems of carmaker General Motors and its German subsidiary Opel, they did so by videoconference. Merkel was not willing to travel to Washington for face-to-face talks with Obama, even though an acceptable date had already been found.

European politicians normally clamor for the opportunity to pay their first visit to a new US president. An early date is seen as a mark of prestige. But Merkel apparently saw no benefit in spending 18 hours in the air to meet with Obama for an hour.

For Merkel, the chairwoman of the conservative Christian Democratic Union (CDU), which has strong trans-Atlantic ties, this is a clear sign of guardedness. Former Foreign Minister Joschka Fischer is already warning against a new "trans-Atlantic drift."

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