What will the G-20 do?

Global finance leaders are meeting in Toronto this weekend, but it's not clear what they might accomplish.

The big issue was supposed to be the value of China's yuan, but the Chinese cleverly knocked that one down the agenda by announcing they might kind of do something soonish to liberalize the trading in their currency. So what else is there?

I have written a piece at Fortune arguing that the big issue, Obama's attempt to push stimulus on cutback-minded Europeans, is likely to end in stalemate. There are plenty of other questions as well, but they are less pressing and in many cases rather technical.

I hope to update this list before the week is out, but for now here's a couple just for starters:

Bank taxes. At the G-20's last meeting, earlier this month in Korea, nations including Brazil, Canada and Japan scotched plans to impose a global bank tax, noting that their banks didn't require government aid in 2008.
But the G-20 said the financial sector "should make a fair and substantial contribution towards paying for any burdens associated with government interventions."

Accordingly, the bank tax is very much alive in the U.S. and other countries hit by the meltdown. The U.K. said this week that it, Germany and France are moving ahead with their own bank-tax plans.

Bank regulation. As the U.S. financial reform push enters its late stages, policymakers around the globe are trying to coordinate their approaches to bank oversight and planning to strengthen rules governing how much money financial institutions must hold against future losses.

"We need to reach agreement internationally on reducing leverage and raising capital requirements, improving both the quantity and quality of capital," Treasury Secretary Tim Geithner and White House economic czar Larry Summers wrote in an op-ed in The Wall Street Journal Wednesday.

 

China. The value of the yuan was set to be the headline topic of debate until the People's Bank of China spoiled the bash. The PBoC said Saturday it would allow the currency to float  more freely within a preset band. Commentators applauded the savvy politics of the move, which is expected to have little immediate economic impact.

That said, China's management of its trade relationships remains a touchy issue in the United States and Europe, which are struggling with high unemployment. Many commentators believe trade tensions will only increase in the second half of 2010 as U.S. growth slows and excitement about China's revaluation move fades.

Global economic imbalances. Perhaps the most intractable problem facing the G-20 is the need to change economic policies not only in deficit nations but also in those running big surpluses.

It is easy to counsel belt-tightening after a long run of profligacy, as seen in the United States. But what to do about Germany, which has been running a large trade surplus yet intends to cut its spending anyway?

"There is a need to move toward rebalancing," Stewart Patrick of the Council on Foreign Relations told me. "But every country has different domestic political demands, and that is what drives decision making."

Rightly so -- which is why some critics are wondering just what the point of the G-20 is, anyway. Like all the other questions, don't expect that to be resolved this weekend.