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G8 Performance at the 2013 Lough Erne Summit:
Economy

John Kirton, Jenilee Guebert and Julia Kulik
G8 Research Group
June 18, 2013

The 2013 G8 Lough Erne Summit was a significant success in regard to its macroeconomic policy performance.

In the summit's first outcome document, G8 leaders released a two-page "Communiqué on Global Economy Working Session" at the end of the summit's first day. They recognized what the world needed, and remained confident that markets would respond to the public, collective messages that they sent. Its appearance was somewhat of a surprise, given British host David Cameron's previous promise to emphasize private discussions and produce only a short communiqué. It showed that the G8 leaders put the G8 and global economic management in first place. The communiqué represented the next step in showing that the compact, cohesive, like-minded G8 explicitly remains an important global economic governor, despite the large, more diverse G20 proclaiming itself its members' primary forum for international economic cooperation in 2009. And it showed that the G7 and Russia were united on important issues, even before the divisive debate about Syria began.

In its substance, the statement was a significant success as well. It opened by declaring "promoting growth and jobs is our top priority," through "supporting demand, securing our public finances and exploiting all sources of growth." It thus struck a balance on the central issue of fiscal consolidation and stimulus, if with a tilt in tone toward the stimulus side. It later affirmed that "restoring medium-term fiscal sustainability remains a priority," while allowing for near-term flexibility, a focus on structural deficit and country-specific circumstances. In its country-specific analysis and admonitions it was clear that the United States, Europe and Japan needed more action now to produce credible, medium-term fiscal consolidation plans.

In its analysis of global economic conditions, it appropriately recognized the presence of important vulnerabilities, particularly in a Europe still in recession. Supporting the work of the G20, it called for Europe to move toward a banking union and strengthening bank balance sheets. Here as elsewhere it emphasized the importance of structure reform.

At the microeconomic level it appropriately highlighted the acute problem of long-term and youth unemployment, and the potential of small and medium enterprises.

Still, there were several shortcomings. The new sources of growth were not specified, including the deficit-friendly boost from full free trade agreements and economic partnership between the European Union and Canada, the United States and Japan. It also ignored, as markets did not, the volatility in financial markets and potential financial crisis in countries such as Venezuela, India, Turkey and Greece again. The broader components of economic and social inequality, beyond unemployment, were ignored, as was the power of young entrepreneurs and startups as a deficit-friendly source of jobs, innovation and growth. The issue of the escalating burden of healthcare and pension costs as a critical component of fiscal sustainability was similarly overlooked.

This significant success is confirmed by the summit's performance on key dimensions of G8 governance. In its domestic political management, the leaders gave three communiqué compliments to specific members (see Appendix A). In its decision making, the G8 made 13 specific future-oriented commitments to bind its members' behaviour in the year ahead (see Appendix B). However, their delivery was doubtful, as those commitments contained only one compliance catalyst and none of the catalysts that count in giving compliance a boost. Similarly, weak was the development of global governance, as the communiqué contained no references to any of the G8's own institutions and only one to an institution outside the G8.

Appendix A: Domestic Political Management: Compliments in the Communiqué on Global Economy Working Session

Julia Kulik, G8 Research Group


Total

Canada

European Union

France

Germany

Italy

Japan

United Kingdom

United States

3

0

1*

0

0

0

1

0

1

Note: The unit is the sentence. The number denotes a "favourable," "positive" or "complimentary" mention including reference to applauding, welcoming, etc., an action by the G8 member in question. It only includes G8 members. * = reference in the communiqué was made to "euro area."

Appendix B: 2013 G8 Lough Erne Summit Commitments in the Communiqué on Global Economy Working Session

Jenilee Guebert, G8 Research Groupp

2013-1: We agreed to nurture the global recovery by supporting demand (macroeconomic)

2013-2: [We agreed to nurture the global recovery by:] securing our public finances (macroeconomic)

2013-3: [We agreed to nurture the global recovery by:] exploiting all sources of growth (macroeconomic)

2013-4: we are committed to taking further action now to restore confidence (macroeconomic)

2013-5: [we are committed to taking further action now to] encourage investment (macroeconomic)

2013-6: [we are committed to taking further action now to encourage] job creation (labour and employment)

2013-7: [we are committed to taking further action now to] support the recovery (macroeconomic)

2013-8: [we are committed to taking further action now to] reduce global imbalances (macroeconomic)

2013-9: We reaffirm our commitment to cooperate to achieve a lasting reduction in global imbalances, which surplus and deficit countries must address (macroeconomic)

2013-10: We are all committed to make the necessary reforms in our own economies to support stronger financial systems, (macroeconomic)

2013-11: [We are all committed to make the necessary reforms in our own economies to support] healthy labour markets, (labour and employment)

2013-12: [We are all committed to make the necessary reforms in our own economies to support] jobs and growth (labour and employment)

2013-13: [We are all committed to make the necessary reforms in our own economies to] bolster world trade. (trade)

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