G7: Biden calls for nations to boost their economies

World

The deal struck on tax understandably grabbed most of the attention at the G7 Finance Ministers’ meeting, ahead of this week’s Leaders’ Summit in Cornwall.

This should transform the international tax treatment of multinationals, tax havens and low tax jurisdictions.

But perhaps the most important decision right now, across the world, is how to manage the withdrawal of the massive pandemic economic support packages.

And that the reason the economic intervention of the US at this meeting and at the upcoming Cornwall summit is of considerable importance.

The message from the Treasury Secretary Janet Yellen in London – which will be echoed by US President Joe Biden in Cornwall – is that all G7 nations, including the UK, should not even be talking about withdrawal of support.

“G7 economies have the fiscal space to speed up their recoveries to not only reach pre-Covid levels of GDP, but also to support a return to pre-pandemic growth paths,” said Secretary Yellen in a speech on Saturday.

“This is why we continue to urge a to shift in our thinking from ‘let’s not withdraw support too early’, to ‘what more can we do now’ – not just to end the pandemic, but to use fiscal policy to invest in addressing generational issues like climate change and inequality.”

Yellen said all G7 economies had the “fiscal space” to speed up their recoveries, not only to make up the size of the economy before the pandemic, but also to catch up with what would have been a growth path, in the absence of Covid-19.

She pointed to International Monetary Fund (IMF) projections showing that the US would be the first G7 economy to return to its pre-pandemic size, thanks to the vaccine rollout and President Biden’s giant stimulus plans.

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