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The G20 summit is underway in St Petersburg

September 5, 2013, St Petersburg

Among other things, the latest global economic trends and financial regulation issues were discussed during the first working meeting themed Growth and Financial Stability.

The G20 summit's work officially began with Vladimir Putin's welcome speech as he addressed the invited heads of state and government.

* * *

Speech at working session of G20 leaders

President of Russia Vladimir Putin: Ladies and gentlemen, dear friends, welcome to the St Petersburg G20 leaders’ summit.

This year marks the G20’s fifth anniversary and therefore we should take stock of our work, both what has been done and what remains.

First and foremost we managed to consolidate the efforts of the world’s leading economies; thanks to joint efforts we were able to mitigate the worst effects of the crisis, and begin to create the conditions to prevent future ones.

I recall that a year ago at the [G20] summit in Los Cabos we talked about creating a sort of anti-crisis firewall. We agreed to take a number of concerted steps to lay its foundation. First was resolving the fundamental problem of reducing budget deficits and public debt levels in developed countries, including in Europe. Second was eliminating large gaps in financial regulation. And finally, third was the problem of the lack of the International Monetary Fund resources.

In general, the G20 has proved its ability to find solutions to very sensitive issues. The situation has improved following the measures that we took. Today, the most pressing of these problems have been resolved or are under control.

However, it is too early to become complacent, and our main task is to bring back sustainable and balanced growth to the global economy. Unfortunately, this problem has not yet been resolved; systemic risks and conditions conducive to the recurrence of an acute crisis persist.

Just recently the IMF lowered its 2013 global growth forecast to 3.1 percent. Even though a year ago its estimates hovered around the 4 percent mark. The US economy is growing, something that certainly makes us all very happy. Unfortunately, growth is still not as fast as we would like.

For the first time in many years we can talk about economic growth in Japan. Unfortunately, there are no guarantees that this tendency is a sustainable one. And in the eurozone the first signs of the end of the recession are now visible: in the second quarter [of 2013] a slight increase in growth of 0.3 percent was recorded, but we are not expecting such good results for the whole year.

In addition, new risks have appeared in just the past few months. At the time, monetary stimulus measures and the quantitative easing applied by some countries helped to support growth and reduce the volatility of financial markets.

But we all understand that policies that amount to giving away free money cannot continue indefinitely. So now our partners are beginning to remove non-standard financial and economic policy measures, and this may affect both the status of key global risks and the economies of other countries. As a matter of fact, we know that they are already affected.

We need to monitor constantly, predict possible consequences, and adopt additional preventive measures in a timely fashion at both national and global levels. But again, let me repeat that the main goal is to provide the basic conditions for global economic recovery via high-quality development. Therefore, stimulating economic growth and creating jobs are crucial for the Russian G20 presidency.

Today we are going to approve the St Petersburg Action Plan for growth and job creation. I think we have every reason to consider that the document reflects a reasonable balance of interests. It will strengthen financial markets’ confidence in our plans and intentions, and at the same time encourage investors to look more closely at the real economy.

The Plan’s main components are budgetary strategies and individual countries’ commitments to implementing structural reforms. During heated debates there was a general awareness of the need to find an optimal balance between fiscal consolidation and supporting growth. It was not an easy task, but we can thank our experts for the results.

Clearly, most developed economics need to reduce their levels of national debt and fiscal deficit in the medium- and long-term. Nevertheless, restoring public financial sustainability alone is not enough to recreate to higher growth rates.

The logic and progression of the global financial and economic crisis have made it clear that we need universal structural reforms. It is important to focus on the fundamental guarantees for stable, long-term growth and development. That is precisely the logic embedded in the St Petersburg Action Plan.

We are talking about steps that are long overdue to regulate the labour and tax markets, develop human capital, modernise infrastructure and regulate commodities markets. Granted, we are still far from achieving breakthrough results: the process of implementing structural reforms is difficult, and often lengthy.

Stabilising the situation overall and mitigating risks pertaining to financial markets and sovereign debts will certainly help to increase the IMF resource base by more than $460 billion. G20 nations have played a key role in implementing this step. And today, we can acknowledge a nearly complete fulfilment of the obligations we took on a year ago in Los Cabos.

Reforms to increasing the role – i.e., the quotas and votes – of developing nations and emerging markets in the IMF should be our next step. I regret to note the lack of progress in fulfilling our mission to complete the 15th quota review by January 2014, although this work has riveted the attention of the entire global community. We are held back by our lack of decision on ratifying the agreements of 2010.

I am calling on all of you to demonstrate greater readiness to seek a balanced, compromise-based decision on redistributing quotas; it will largely determine the efficacy and legitimacy of the work by the IMF and G20.

Meanwhile, we have achieved noticeable success in reforming financial regulation. This issue has been at the centre of our forum’s attention since the start of the global crisis. I would like to particularly note that in 2013, the Financial Stability Board became a full-fledged international organisation, which clearly strengthens its potential in the work to improve financial regulation.

We have also made significant progress in developing approaches to restructuring and partially implementing the reforms agreed upon at the international level in the following key areas. These are very important areas, so I am going to list them.

The first is the Basel III bank regulation. The second is reforming OTC derivatives markets. The third is measures pertaining to systemically significant financial institutions. In order to conduct such complex reforms, it is imperative that the world’s leading economies strive to reach compromise-based decisions. Clearly, national measures to reinforce financial stability should not lead to unjustifiably high regulatory costs for foreign participants in the financial market.

Moreover, the quality of the financial regulations depends directly on the efficacy of measures to counteract tax evasion. This has become a key topic this year.

Under the conditions of increasing globalisation in the world economy, national-level efforts are insufficient to effectively counter unscrupulous taxpayer behaviour. Clearly, each economy strives to create the most appealing tax regime possible for businesses, but that does not mean these regimes should be used for tax evasion.

Based on our meeting, we plan to adopt a joint Action Plan to fight tax base erosion and the exclusion of profits from taxation. We have prepared it jointly with the OECD.

I want to thank all of our colleagues for this work. Without them, it would be nearly impossible to achieve this result. The plan stipulates a whole range of steps aimed at increasing transparency and improving international tax agreements. The result of its implementation should be a significant reduction in the practice of channelling profits into offshore accounts and an increase in tax payment in the jurisdiction where a given product or service is produced.

Colleagues, I propose that we move on to exchange opinions on our agenda. Let’s discuss global economic trends and how to react to them. Let’s talk about problems in financial regulation, including the taxation action plan and the global financial architecture reform. Let’s also finalise the St Petersburg Action Plan, which was prepared by experts.

I want to thank you for your attention. As we begin this part of our joint work, I would like to propose that we pass the floor to Ms Lagarde, who will give an assessment of the global economic and financial situation.

Thank you very much for your attention.


September 5, 2013, St Petersburg