Leaders of the G-20 left their latest economic talks on Tuesday with no answers to the biggest, most vexing international dilemma: what to do about the faltering euro zone. Throughout the summit, traditional Western heavyweights like the U.S. and its European allies took a backseat in the proceedings to emerging economic titans like China, Russia, India and Brazil — who together promised tens of billions of dollars to the International Monetary Fund for Spain and Greece’s failing economies.
Ultimately, the participants left knowing what they already knew: saving Europe means either major cuts or major bailouts. At the end of the two-day summit, the G-20 released a statement saying that “we are united in our resolve to promote growth and jobs” and announced what was called the Los Cabos Growth and Jobs Actions Plan — a communiqué long on platitudes but short on substantive recommendations to create jobs and bolster a flagging economy.
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Those are urgently needed. Three days before the leaders met, international humanitarian NGO Oxfam released numbers that showed the crippling effects the euro-zone crisis could have on the many countries not represented at the summit. Oxfam’s research showed that a breakup of Europe’s common currency could lead to a loss of $30 billion in trade and revenue for the world’s least developed countries. The organization called out G-20 leaders for not appreciating how their decisions (or lack thereof) this week could have dire consequences for countries beyond their borders. “The G-20 has taken it upon itself to be the stewards of the global economy, and yet it’s only 20 countries out of close to 200 countries that exist in the world,” says Gawain Kripke, Oxfam’s director of research and policy.
Research compiled by Oxfam calculated the monetary loss that the least developed countries in the world would suffer should the euro zone break up, and the numbers are staggering. Some 39 of the world’s poorest countries would collectively lose $30 billion in trade and investment — almost a fourth of the entire global aid budget. The first $20 billion would come from the drop in GDP that most European countries would see without the euro. Lack of European investment that many of those countries are planning for and relying upon would account for the other $10 billion. All this would come in addition to mass food shortages and the pressures brought on by already dwindling European aid contributions, according to Oxfam’s press release. “To some extent, there’s a game of chicken happening between rich countries and within Europe about how far to push austerity for countries that are on the edge, like Greece or Spain,” Kripke says. “What we’re saying is that the poorest countries and the poorest people could be victims of this game of chicken.”
The G-20, argues Oxfam, ought to understand that the stakes for finding economic solutions to the euro-zone crisis are very high, and not only for the developed world. The evaporation of $30 billion from the budgets of impoverished nations would mean tremendous upheaval, made worse by a sustained dip in investment in years to come. Says Kripke: “[There will be] a legacy of reduced economic output and reduced economic development for decades if [the euro-zone breakup] happens.”
To keep such enormous damages from hitting these countries, Oxfam offered a few suggestions for the G-20, including new taxes on carbon emissions and increased foreign aid. The most promising of the suggestions is a new Europe-wide Fair Transaction Tax, or FTT, also known to some as a Robin Hood tax. Kripke says the individual levy exacted by such a tax would be negligible, but that overall it could raise billions of dollars both for domestic use and investment in developing countries. According to Kripke, at least 10 countries have backed the advent of an FTT; it is unclear, however, how much of that tax would go toward global aid.
Still, the West has a historic habit of tightening its purse strings when domestic economies falter. Kripke suggests that courageous political leadership and moral clarity are the only things that could fix such an issue. With a wariness of the European project and streaks of xenophobia characterizing a number of recent elections in the West, that sort of virtuous altruism looks remote. “Aid dollars matter so much to poor people — they literally keep people alive,” Kripke stresses, adding that Oxfam is thankful that global aid has yet to significantly dry up and hopeful that it won’t. “We’re hoping we can weather this storm.”