Pittsburgh : the recovery summit ?

This week, on 24 and 25 September, Pittsburgh will host the third G20 Summit since the outbreak of the financial crisis just over a year ago. Will this be the recovery summit? Will these 20 Leaders take measures to prevent a repeat of the near financial meltdown of 2008, and most of all, lay the groundwork for sustainable recovery of the global economy?

Remember, even if stock markets have been rising, and some indicators in the US and Europe have removed the worst of gloom and doom, unemployment is still on the rise, and public sector budgets are being hit badly in many countries. In some case, as in Central and Eastern Europe, public revenues have already dropped dramatically. In other areas, public revenue cuts are only now starting to bite because of time lags. Even where national stimulus packages have helped, local government revenues have dropped drastically in many countries, in the US, Chile and Sweden, for example, and that means schools and teachers have been hit.

Earlier this month, there was a lot of talk of “exit strategies”, which is code for winding down stimulus packages and cutting back on public spending in order to reduce debt. There is less talk of that in the final days leading up to the Summit. Australian PM Kevin Rudd, UK PM Gordon Brown, French President Nicolas Sarkozy and US Treasury Secretary Tim Geithner, have all said that talk of ending stimulus packages is premature.

Some issues being highlighted:

From leaked letter from the Chancellor of Germany, the PM of Britain and the President of France:
3Stop financial practices that lead to the crisis, including inflated and inappropriate bonuses.

From leaked letter from the White House (by the US “Sherpa”, the top official advising the President):
3Address imbalances in the global economy
3Establish a framework for sustainable growth
3Prioritize jobs and skills for the 21st century
3Strengthen recovery in the poorest countries

By the IMF Director General:
3Rebalance growth – move away from countries having large surpluses while others have large deficits. The Ambassador of China to the US, however downplays the issue of global imbalances, and calls for action to avoid protectionism.

By the World Bank President:
3Don’t leave the poor behind

The US delegation, host for the Summit, is circulating a proposal to support the ILO Jobs Pact and to convene a meeting of ILO Labour Ministers and top education officials in the US in early 2010. The Obama administration underlines that skills development is fundamental to durable recovery. If this proposal is approved by the other G20 leaders, we have a good basis for moving forward with EI’s agenda – Invest in education: the smart strategy for recovery.


Source: Global Unions Washington Office

Links:

Global Unions Pittsburgh Declaration (pdf) http://download.ei-ie.org/Docs/WebDepot/0909t_g20_Pittsburgh_en.pdf

Proposed US workforce policy proposal (pdf) http://download.ei-ie.org/Docs/WebDepot/G20%20Pittsburgh%20US%20proposal.pdf

Letter by Michael Froman (pdf) http://download.ei-ie.org/Docs/WebDepot/Froman%20Letter%20on%20Pittsburgh%20Summit%20Agenda.pdf

Letter by Angela Merkel, Gordon Brown, Nicolas Sarkozy (pdf) http://download.ei-ie.org/Docs/WebDepot/lettreMerkelBrownSarkozy.pdf

Sustainable global recovery ?

As Europe, North America and East Asia return to work after the summer break the question posed everywhere is: has a global recovery started? Stock markets continue to improve and some of the major surviving banks have reported profits. Cautious optimism came out of the annual meeting of Central Bankers held in the US (in Jackson Hole, Wyoming) over the weekend. US Federal Reserve Chairman Ben Bernanke said “the prospects for a return to growth … appear good”. But European Central Bank President Claude Triclet admitted feeling “a little bit uneasy” over suggestions that “we are close to back to normal” (Financial Times, 22/23 August 2009).

A few days earlier on 19 August, IMF Chief Economist Olivier Blanchard posted an article stating, yes, the recovery had started, but posing the next question: “Will it be sustainable?” (Blanchard: “Sustaining a Global Recovery” link: http://www.imf.org/external/pubs/ft/fandd/2009/09/blanchardindex.htm). Blanchard also said “some parts of the economic system have broken”. Then he put his finger on the big issue: “unemployment … is not expected to crest until some time next year”. In other words, the number of people thrown out of their jobs by the crisis, estimated by ILO as at least 50 million to date, will continue to increase until “some time next year”. Millions of families will continue to find themselves in dire straits while financial traders get back to “business as usual”.

Two other issues have to be set against the cautious optimism of the central bankers and the IMF.

The first directly concerns EI members worldwide. It is the pressure on public sector budgets resulting from massive drops in revenue, especially at local level in many countries, the increased debt resulting from fiscal stimulus packages, and the growing cost of health care and pension plans. Blanchard discusses these issues in his article. Public school systems throughout the OECD are already confronted by this revenue drop and funding for schools is not likely to improve in 2010.

The second issue is that while the crisis has been global, the impact varies greatly among regions and individual countries. Blanchard discusses in some details the situation in Asia. He states that the GDP of emerging Asia (China, India, Malaysia, Indonesia, Thailand) is roughly 50 per cent of US GDP, but is projected to increase to 70 per cent within 5 years. The emerging economies of Latin America are not mentioned, but Brazil, Argentina and Chile are also increasing their share of world GDP. On the other hand, capital inflows to these countries have decreased dramatically. The drop in such inflows for the least developed countries, mainly in Africa and Asia, is likely to be even more dramatic, despite the decisions of the London G20. In Eastern and Central Europe, public services, schools and teachers have been hit badly and the outlook is grim for at least this year and next. This is why EI is convening a meeting of education union leaders in Warsaw next week, so as to share first hand information and to work out the best strategy to pursue in these countries. (Regarding the general economic outlook in the area, see also the International Herald Tribune “Cash gone, East Europe is left adrift in sea of debt”, 24 August 2009).

Blanchard’s question about sustainability remains central. We have to keep up the effort to get across the message that investment in education and skills is a key factor in sustainability. As a mass of often conflicting information comes out in global and national media, we must keep that focus: education is a smart investment in sustainable recovery.

Sources: Global Unions Washington office, Financial Times, International Herald Tribune

Roumanie - grève suspendue

BUCAREST, 4 mai 2009 (AFP) - Les enseignants roumains, qui prévoyaient d'observer une grève mardi pour protester contre le gel de leurs salaires, ont décidé de suspendre ce mouvement, à la suite de négociations avec le ministère de l'Education, ont annoncé lundi leurs responsables syndicaux.

"En décidant de suspendre cette grève nous voulons faire un geste envers le gouvernement, mais cela ne veut pas dire que nous abandonnons ce mouvement", a déclaré Marius Nistor, président de la fédération Spiru Haret.

Selon lui, une décision définitive sera prise mercredi, après de nouvelles négociations avec le ministère.

Les enseignants avaient menacé d'observer trois jours de grève courant mai, pour protester contre une réduction de 160 millions d'euros du budget de l'Education, doublée d'une baisse de 70% en 2009 par rapport à 2008 des fonds alloués à la recherche.

A l'issue des discussions avec les syndicalistes, la ministre de l'Education Ecaterina Andronescu a annoncé que le niveau des salaires serait maintenu courant 2009, tandis que des fonds supplémentaires seraient trouvés pour la recherche.

Auparavant, le président Traian Basescu avait appelé les enseignants à la "responsabilité", faisaint état des "difficultés" de l'Etat à trouver des ressources pour financer les dépenses publiques.

"Il s'agirait de faire preuve de responsabilité que de comprendre que la crise peut être surmontée uniquement par la solidarité", avait estimé le président dans une allocution télévisée.

Frappée par la crise économique, la Roumanie a contracté un prêt d'environ 20 milliards d'euros auprès du Fonds monétaire international (FMI) et de l'UE, s'engageant en échange à réduire le déficit budgétaire, en gelant notamment les salaires dans le secteur public.

Source: Ivo de Crée, ITUC and Harold Tor, EI

Latvian GDP contracts by 29%

Two weeks ago the IMF forecasted a drop in GDP for the Baltic nations of over 10%. But the Wall Street Journal reported yesterday that Latvia’s GDP contracted a massive 29% in January-March 2009, compared with the same 3 months in 2008. Annual contraction for this year is now predicted to be at least 20%, far more than contractions in past crises like 12% for Argentina and 13% for Indonesia. The social consequences of those earlier crises were dramatic in those two countries. In Latvia, the Prime Minister said his government plans to continue slashing spending and public sector wages.

Source: Wall Street Journal, 12 May 2009