It was all smiles at the G-20 summit for Barack Obama, Silvio Berlusconi and Dmitry Medvedev AP

Participants in the G-20 Summit in London last week dedicated $1.1 (zł.3.665) trillion for ailing economies, to be distributed through the International Monetary Fund and other financial institutions.

This was good news for the many CEE states that have already accepted a helping hand from the IMF. The fund will get $750 (zł.2,500) billion, with another $250 (zł.833) billion allocated for “special drawing rights.” According to the New York Times, China is expected to contribute $40 (zł.133.3) billion, Japan and the EU each pledged $100 (zł.334) billion, while the US promised to contribute $100 billion, pending congressional approval.

However, Jarosław Kaczyński, head of opposition party Law and Justice, criticized Poland’s absence at the G-20 Summit, calling it “a great failure of Polish diplomacy.”

The government’s stance was that Poland would be represented at the summit by the head of the European Commission and the Czech presidency of the European Union, which would speak for the entire EU, including those member states not attending the summit themselves.

Solutions, new problems

World leaders at the summit agreed to create a number of institutions to help manage financial markets. A Financial Stability Board will monitor markets to forecast for future crises. Tax havens will be publicly identified and punished if they do not agree to share tax information with authorities. Hedge funds will be regulated, while the salaries and bonuses of bankers will be kept under tighter control.

“Extended resources for the IMF is definitely good news and certainly more than was expected. It will provide an extra comfort factor for struggling economies around the world, including those of Poland’s neighbors, such as Hungary and the Baltic states, which have run into major difficulties,” said George de Nemeskeri-Kiss, a professor of economics at the EM Lyon Business School.

However, he noted that $1.1 trillion might sound like a lot on paper, but it isn’t when compared with the combined GDP of the G-20 countries. Prof. de Nemeskeri-Kiss was also disappointed not to see any initiative to clean up banks’ balance sheets.

“It’s essential that faster progress is made to clear up toxic assets. Until this issue is properly resolved then all the financial stimulus in the world will not work,” he said.
Andrzej Sadowski of the Adam Smith Center didn’t think the G-20 Summit agreements were a breakthrough, calling the declarations “short-sighted.” “Instead of blaming themselves for creating unfavorable regulations for their taxpayers and lack of fundamental reforms, the countries blamed tax havens,” he told PAP.

Investors pleased

Sadowski called capping the bankers’ bonuses further interference of state into the banking industry. “Not to make it safer or more predictable, but to gain a share of power over them,” he commented. In his opinion, a better alternative would be adopting a free-trade policy, deregulation and a return to economic liberty, but he admitted that neither the EU nor the US would accept such a strategy.

Following the news from London, the Warsaw Stock Exchange’s blue-chip WIG20 index shot up by seven percent. Other major stocks indices in the region moved similarly. The złoty, along with other CEE currencies, gained as well.