By Randall Palmer
OTTAWA Aug 30 Next week's Group of 20 summit
will discuss the volatility in emerging markets that erupted
after the U.S. Federal Reserve started to talk about scaling
back its massive bond-buying program, Canadian officials said on
Friday, but they suggested the Fed's move was not the only
reason for the turbulence.
A senior official, briefing reporters on condition of
anonymity, said the summit in Russia of the G20 leading
economies will take time to examine the reasons for the market
volatility in India and other countries.
He said there were several factors involved, among them
improving private-sector demand in the United States that is
encouraging the Fed pullback, which he said is a good-news story
that creates challenges in other parts of the world.
"But some of these challenges also reflect the state of
their own economies," he said.
India is so concerned about the market tumult that it is
seeking support from other emerging countries for coordinated
intervention in foreign exchange markets. India's
currency has fallen by 20 percent against the U.S. dollar since
A Canadian official who was willing to be named, Andrew
MacDougall, spokesman for Prime Minister Stephen Harper, noted
an irony in the criticism of the Fed's move to reduce its
bond-buying program, known as quantitative easing.
"We've kind of heard the opposite complaint when
quantitative easing was happening, that that was disrupting
flows as well, and now that they're moving in the other
direction, that causes a different set of challenges," he said.
MacDougall also said Canada would continue to press at the
G20 for progress on reducing government deficits and debt, a
policy push that has received less emphasis of late in light of
high unemployment in Europe and elsewhere.
"We want to see that fiscal consolidation continued," he
said, saying that Harper felt it was important for the G20's
credibility that it follow up on previous commitments to cut
"If you don't have your books in order, it limits your
ability to maneuver, so the longer you put that decision off,
the harder your choices become."
The official who spoke on condition of anonymity said that
countries at the St. Petersburg summit, which begins next
Thursday, would present individual fiscal strategies rather than
the G20 agreeing on some across-the-board reduction in the debt
"It's not a one-size-fits-all approach," he said.
INDIA SHOULD REFORM
Another government official, who will be going to the
summit, said countries that need funds for long-term investment
in infrastructure should look at what can be done to make
themselves more attractive to private investment from banks,
pension funds and insurance companies.
"India's a good example. India has huge infrastructure
financing needs...and certainly there has been a concern
expressed by Indian officials in the past that there's less
financing available than there used to be," he said.
In international debates, he said, there have been calls for
governments and multilateral development banks to fill the gap.
"I think Canada's view would be that the evidence suggests
that actually that some of the concerns are about economic
fundamentals," he said.
"They're about barriers to foreign investment, they're about
regulatory issues and so on, and it kind of behooves countries
to look at what more they can do to strengthen the climate for
investment, because there is a lot of private-sector money