Yellen Takes ‘Go Big’ Message to G-7 to Aid Global Recovery
Janet Yellen, U.S. treasury secretary. (Photographer: Photographer: Andrew Harrer/Bloomberg)

Yellen Takes ‘Go Big’ Message to G-7 to Aid Global Recovery

Treasury Secretary Janet Yellen stressed the need for the Group of Seven countries to “go big” with fiscal stimulus to support economic recovery from the global pandemic.

In her first call with foreign counterparts and central bankers from the G-7, Yellen said that “the time to go big is now” and that the group should focus on how to help the economy, the U.S. Treasury Department said in a statement after the virtual meeting held on Friday.

Yellen Takes ‘Go Big’ Message to G-7 to Aid Global Recovery

The online gathering of finance chiefs from the world’s top industrial economies addressed a proposed expansion in the International Monetary Fund’s lending firepower along with digital taxation and climate change.

The U.S. is leaning toward backing an increase in the IMF’s special drawing rights, or SDRs, by as much as $500 billion, Bloomberg News reported earlier this month. The fund has been lobbying for more help to support developing nations against the Covid-19 crisis.

The G-7 discussed increasing the IMF’s resources during Friday’s call, and the group expects a decision to be announced later this month on the back of a Group of 20 discussion, according to one person familiar with the matter. The finance ministers’ goal in Friday’s talks was to build momentum around helping developing nations, the person said on the condition of anonymity.

Change in Washington

U.K. Chancellor of the Exchequer Rishi Sunak, who hosted the virtual meeting, also stressed the importance of the G-7 “shaping support for vulnerable countries,” according to a statement from his office.

The U.S. has a de-facto veto in the IMF on the decision, and former Treasury Secretary Steven Mnuchin had previously blocked the fund’s requests to boost its special drawing rights.

Yellen highlighted in the call that there’s a new tone out of Washington. The U.S. “places a high priority on deepening our international engagement and strengthening our alliances,” she said, according to the Treasury’s statement.

On fiscal policy, the U.S. is among the most aggressive, with the Biden administration pursuing a $1.9 trillion package in Congress. French Finance Minister Bruno Le Maire said the world’s biggest economies must coordinate stimulus plans and policies in an effort to reduce key risks including trade tensions and inequality.

While the Biden administration doesn’t need Congressional approval to support a $500 billion boost to the IMF’s resources, GOP lawmakers have been vocal about their opposition.

French Hill, an Arkansas Republican on the House Financial Services Committee, has called it a “giveaway to wealthy countries and rogue regimes” such as China, Russia and Iran.

Digital Taxation

The finance chiefs also discussed the continuing effort to find international consensus on taxing internet giants such as Facebook Inc.

Japanese Finance Minister Taro Aso told reporters that given how Friday’s talks went there’s an increasing possibility of a compromise on the international taxation issue. American and European officials have shifted their positions in recent months, he said. Aso said he previously thought that getting a conclusion by mid-2021 was almost impossible.

The group will hold another meeting next month, Aso said.

Biden “believes the largest corporations should pay their fair share in taxes,” White House Press Secretary Jen Psaki said Friday at a briefing. She said Biden is “committed” to reaching a multilateral agreement.

The U.K. underlined its commitment to progress on the tax challenges of the digital economy, and called on the G-7 to work toward reaching an enduring multilateral solution by the mid-2021 deadline agreed by the G-20, the U.K. Treasury said.

Talks on digital taxation have been held under the rubric of the Paris-based Organization for Economic Cooperation and Development.

“We have to come to an agreement this summer,” on the matter, Le Maire said, according to the French finance ministry.

©2021 Bloomberg L.P.

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