G-7 Leaders Pledge Continued Fiscal Support for Economies

Leaders of the Group of Seven industrialized nations pledged during a call on Friday to sustain government spending to help economies recover from the coronavirus pandemic as they attempted to start a new chapter in multilateral cooperation.

As U.S. President Joe Biden made his debut as leader on the world stage the discussion centered on how to, in the words of British host Boris Johnson, “build back better” after the health crisis.

“We will continue to support our economies to protect jobs and support a strong, sustainable, balanced and inclusive recovery,” the G-7 said in a statement published after the call. “Recovery from Covid-19 must build back better for all.”

The G-7 nations committed to considering debt relief for developing nations and promised to eliminate net carbon emissions by 2050 at the latest.

G-7 Leaders Pledge Continued Fiscal Support for Economies

They also underlined the importance of multilateralism, a sign that the group wanted to move past the Donald Trump era. It agreed to strengthen the World Health Organization, a body that the previous U.S. administration had chastised and then withdrawn from.

“Drawing on our strengths and values as democratic, open economies and societies, we will work together and with others to make 2021 a turning point for multilateralism and to shape a recovery that promotes the health and prosperity of our people and planet,” the leaders said in their communique. “We will intensify cooperation on the health response to Covid-19.”

The pledge to keep spending taps running also recalls the commitments made after the financial crisis of 2008, when leaders promised to coordinate policy. It’s an acknowledgment that economies benefit from strong demand outside their own borders.

On the planned Tokyo Olympics, all the G-7 leaders expressed their support for Japan’s plan to hold the Games this summer, Japanese Prime Minister Yoshihide Suga said in a video posted on the government website after the meeting.

Differences Over China

The call was also an opportunity for western leaders to start to sketch out a plan for dealing with China and its growing might in areas from trade to technology. That’s an issue their nations are increasingly at odds over.

German Chancellor Angela Merkel, in her final year as leader after 16 years in office, said the G-7 wanted to bolster cooperation with the country.

“We have made clear that the recovery has to be about a mutually beneficial and fair economic system,” Merkel told reporters after the call. “Here the G-7 says that we want to cooperate with the G-20, especially with China.”

In her speech, at the Munich Security Conference, she did acknowledge the tension in that relationship: “Wherever we have been weak, where we have not been ready to make changes, subsidiary or alternative structures have developed in Asia, often under the leadership of China. We have to convince through actions that we are willing to stand up to this.”

Biden followed up in Munich, shortly after the leaders’ discussion, and was explicit on the issue. “We have to push back against the Chinese government’s economic abuses and coercion that undercut the foundations of the international economic system,” Biden said. “The competition with China is going to be stiff. That’s what I expect. And that’s what I welcome.”

Leaders used the call to emphasize the need for digital platforms such as Facebook Inc. and Twitter Inc. to promote democratic values and freedom of expression, according to a French official, who asked not to be named in line with protocol.

The G-7 statement insisted on the need to reach a “consensus-based solution” on international taxation, amid talks on how to tax digital giants.

Leaders are set to meet in person in Cornwall, southwest England, in June.

©2021 Bloomberg L.P.

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