Remarks by President Obama at Press Conference After G20 Summit

Convention Center
Los Cabos, Mexico

5:47 P.M. MDT

PRESIDENT OBAMA:  I want to begin by thanking my good friend and partner, President Calderon, and the people of Los Cabos and Mexico for their outstanding hospitality and leadership.  Mexico is the first Latin American country to host a G20 summit, and this has been another example of Mexico playing a larger role in world affairs, from the global economy to climate change to development.  

Since this is my last visit to Mexico during President Calderon’s time in office, I want to say how much I’ve valued Felipe’s friendship and the progress that we’ve made together over the past several years.  And building on the spirit here at Los Cabos, I’m absolutely confident that the deep ties between our countries will only grow stronger in the years to come.  

Now, over the past three years, these G20 summits have allowed our nations to pull the global economy back from a free fall and put us back on the path of recovery and growth.  In the United States, our businesses have created jobs for 27 months in a row -- more than 4 million jobs in all -- and our highest priority continues to be putting people back to work even faster.
 
Today, we recognize that there are a wide range of threats to our ongoing global economic recovery and growth.  But the one that’s received the most focus obviously and that does have a significant impact on the United States as well as globally is the situation in Europe.  As our largest trading partner, slower growth in Europe means slower growth in American jobs.  So we have a profound interest in seeing Europe prosper.  That’s why I’ve been consulting closely with my European counterparts during this crisis, as we’ve done here at Los Cabos.

I do think it’s important to note, however, that most leaders of the eurozone, the economies are not part of the G20.  The challenges facing Europe will not be solved by the G20 or by the United States.  The solutions will be debated and decided, appropriately, by the leaders and the people of Europe. 

So this has been an opportunity for us to hear from European leaders on the progress they’re making and on their next steps -- especially in the wake of the election in Greece, and because they’re heading into the EU summit later this month.  It’s also been a chance for the international community, including the United States -- the largest economy in the world, and with our own record of responding to financial crises -- to stress the importance of decisive action at this moment.

Now, markets around the world as well as governments have been asking if Europe is ready to do what is necessary to hold the eurozone together.  Over the last two days European leaders here in Cabos have made it clear that they understand the stakes and they pledged to take the actions needed to address this crisis and restore confidence, stability, and growth.  Let me just be a little more specific. 

First, our friends in Europe clearly grasp the seriousness of the situation and are moving forward with a heightened sense of urgency.  I welcome the important steps that they have already taken to promote growth, financial stability and fiscal responsibility.  I’m very pleased that the European leaders here said that they will take all necessary measures to safeguard the integrity and stability of the eurozone, to improve the functioning of the financial markets.  This will contribute to breaking the feedback loop between sovereigns and banks, and make sovereign borrowing costs sustainable. 

I also welcome the adoption of the fiscal compact and it’s ongoing implementation, assessed on a structural basis, together with a growth strategy which includes structural reforms. 

G20 leaders all supported Europe working in partnership with the next Greek government to ensure that they remain on a path to reform and sustainability within the eurozone.  Another positive step forward was the eurozone’s commitment to work on a more integrated financial architecture -- including banking supervision, resolution, and recapitalization, as well as deposit insurance.  Also, in the coming days Spain will lay out the details of its financial support request for its banks restructuring agency, providing clarity to reassure markets on the form and the amount and the structure of support to be approved at the earliest time. 

It’s also positive that the eurozone will pursue structural reforms to strengthen competitiveness in deficit countries, and to promote demand and growth in surplus countries to reduce imbalances within the euro area.

And finally, I welcome the fact that Europe is determined to move forward quickly on measures to support growth and investment including by completing the European single market and making better use of European funds. 

Of course, Europe is not, as I said, the only source of concern when it comes to global growth.  The G20 also agreed that reversing the economic slowdown demands a renewed focus on growth and job creation.

As the world’s largest economy, the best thing the United States can do is to create jobs and growth in the short term, even as we continue to put our fiscal house in order over the long term.  And as part of that effort, we’ve made significant progress in advancing our trade agenda.  This is an essential to promoting growth, innovation and jobs in the United States.

Here in Los Cabos, we announced important steps towards closer integration with three of our major trading partners.  Both Mexico and Canada have been invited to join the Trans-Pacific Partnership negotiations, which is an ambitious 21st century trade agreement that will now include 11 countries.  And this agreement holds enormous opportunities to boost trade in one of the world’s fastest growing regions. 

Even as we build this new framework for trade in the Asia Pacific, we’re also working to expand our trade with Europe.  So today, the United States and the European Union agreed to take the next step in our work towards the possible launching of negotiations on an agreement to strengthen our already very deep trade and investment partnership.

In addition, and in keeping with our commitments at the last G20 in Cannes, we agreed that countries should not intervene to hold their currencies at undervalued levels, and that countries with large surpluses and export-oriented economies needed to continue to boost demand.

So, in closing, I’d note that with Mexico’s leadership, we continue to make progress across a range of challenges that are vital to our shared prosperity -- from food security to Greek economic growth that combats climate change, from financial education and protection for consumers to combating corruption that stifles economic growth, and in strengthening financial regulation to creating a more level playing field.  All of this happened in large part because of the leadership of President Calderón.  I want to thank him, and I want to thank my fellow leaders for their partnership as we work very hard to create jobs and opportunity that all of our citizens deserve.

So with that, I’m going to start with Ben Feller of AP.

Q    Thank you very much, Mr. President.  We’re all hearing a lot of encouraging promises about what Europe plans to do, but can you assure us that those actions, if they’re able to come together on them, will actually do anything to create jobs in America this year?  And if Europe is not able to rally in a big way pretty quickly, do you think that will cost you the election?

THE PRESIDENT:  Well, first of all, I think that what I’ve heard from European leaders during the course of these discussions is they understand the stakes.  They understand why it’s important for them to take bold and decisive action.  And I’m confident that they can meet those tests.

Now, I always show great sympathy for my European friends because they don’t have to deal with one Congress -- they have to deal with 17 parliaments, if you’re talking about the eurozone.  If you’re talking about the European Union, you’re talking about 27.  And that means that sometimes, even after they’ve conceived of approaches to deal with the crisis, they have to work through all the politics to get it done.  And markets are a lot more impatient. 

And so what I’ve encouraged them to do is to lay out a framework for where they want to go in increasing European integration, in resolving the financial pressures that are on sovereign countries.  Even if they can’t achieve all of it in one full swoop, I think if people have a sense of where they’re going, that can provide confidence and break the fever.  Because if you think about Europe, look, this remains one of the wealthiest, most productive regions of the world.  Europe continues to have enormous strengths -- a very well-educated, productive workforce.  They have some of the biggest, best-run companies in the world.  They have trading relationships around the world.  And all of these problems that they’re facing right now are entirely solvable, but the markets, when they start seeing potential uncertainty, show a lot more risk aversion, and you can start getting into a negative cycle.

And what we have to do is it to create a positive cycle where people become more confident, the markets settle down, and they have the time and the space to execute the kinds of structural reforms that not only Europe, but all of us are having to go through, in balancing the need for growth, but also dealing with issues like debt and deficits.  And I’m confident that over the next several weeks, Europe will paint a picture of where we need to go, take some immediate steps that are required to give them that time and space.  And based on the conversations that I’ve had here today and the conversations that I’ve had over the last several months, I’m confident that they are very much committed to the European project.

Now, all this affects the United States.  Europe as a whole is our largest trading partner.  And if fewer folks are buying stuff in Paris or Berlin, that means that we’re selling less stuff made in Pittsburgh or Cleveland.  But I think there are a couple of things that we’ve already done that help.  The financial regulatory reforms that we passed means that our banks are better capitalized.  It means that our supervision and our mechanisms for looking at trouble spots in our financial system are superior to what they were back in 2008.  That’s an important difference.  But there's still some more things we can do.

And the most important thing we can do is something that I’ve already talked about.  If Congress would act on a jobs plan that independent economists say would put us on the path of creating an extra million jobs on top of the ones that have already been created -- putting teachers back in the classroom, putting construction workers back on the job rebuilding infrastructure that badly needs to be rebuilt -- all those things can make a significant difference.  And given that we don’t have full control over what happens in Europe or the pace at which things happen in Europe, let’s make sure that we’re doing those things that we do have control over and that are good policy anyway.

Q    ((inaudible.)

THE PRESIDENT:  I think it’s fair to say that any -- all these issues, economic issues, will potentially have some impact on the election.  But that’s not my biggest concern right now.  My biggest concern is the same concern I’ve had over the last three and a half years, which is folks who are out of work or underemployed or unable to pay the bills -- what steps are we taking to potentially put them in a stronger position.  And I consistently believed that if we take the right policy steps, if we’re doing the right thing, then the politics will follow.  And my mind hasn’t changed on that.

Jeff Mason, Reuters.  Where’s Jeff?

Q    Thank you, sir.  My question is about Syria.  Did President Putin of Russia indicate any desire on Russia's part for Assad to step down or to leave power?  And did you make any tangible progress in your meetings with him or with Chinese President Hu in finding a way to stop the bloodshed there?

PRESIDENT OBAMA:  Well, these were major topics of conversation in both meetings.  And anybody who's seen scenes of what's happening in Syria I think recognizes that the violence is completely out of hand, that civilians are being targeted, and that Assad has lost legitimacy.  And when you massacre your own citizens in the ways that we've seen, it is impossible to conceive of a orderly political transition that leaves Assad in power.

Now, that doesn’t mean that that process of political transition is easy.  And there's no doubt that Russia, which historically has had a relationship with Syria, as well as China, which is generally wary of commenting on what it considers to be the internal affairs of other countries, are and have been more resistant to applying the kind of pressure that's necessary to achieve that political transition. 

We had a very candid conversation.  I wouldn't suggest that at this point the United States and the rest of the international community are aligned with Russia and China in their positions, but I do think they recognize the grave dangers of all-out civil war.  I do not think they condone the massacres that we've witnessed.  And I think they believe that everybody would be better served if Syria had a mechanism for ceasing the violence and creating a legitimate government.

What I've said to them is that it's important for the world community to work with the United Nations and Kofi Annan on what a political transition would look like.  And my hope is, is that we can have those conversations in the coming week or two and that we can present to the world, but most importantly, to the Syrian people, a pathway whereby this conflict can be resolved. 

But I don't think it would fair to say that the Russians and the Chinese are signed on at this point.  I think what is fair to say is that they recognize that the current situation is grave; it does not serve their interests; it certainly does not serve the interests of the Syrian people.  And where we agree is that if we can help the Syrian people find a path to a resolution, all of us would be better off.

But it's my personal belief -- and I shared this with them  -- that I don't see a scenario in which Assad stays and violence is reduced.  He had an opportunity with the Annan plan.  They did not fulfill their side of the deal.  Instead we saw escalation and murder of innocent women and children.  And at this point, we have the international monitors that were sent in having to leave because of this violence that's being perpetrated.  And although you'll hear sometimes from some commentators that the opposition has engaged in violence as well, and obviously there's evidence of that, I think it's also fair to say that those haunting images that we saw in places like Hom were the direct result of decisions made by the Syrian government and ultimately Mr. Assad is responsible.

Q    Did either of them talk about Syria without Assad?

PRESIDENT OBAMA:  We had an intensive conversation about it. If you're asking me whether they signed on to that proposition, I don't think it would be fair to say that they are there yet.  But my -- I'm going to keep on making the argument and my expectation is, is that at some point there's a recognition that it's hard to envision a better future for Syria while Assad is still there.

Julianna Goldman.

Q    Thank you, Mr. President.  One of Mitt Romney's economic advisors recently wrote in a German publication that your recommendations to Europe and to Germany in particular reveal ignorance of the causes of the crisis, and he said that they have the same flaws as your own economic policies.  I want to get your response to that, and also to follow up on Ben's question.  Europe has been kicking the can down the road for years, so why are you any more convinced that we won't see another three-month fix emerge out of Brussels at the end of the month?

PRESIDENT OBAMA:  Well, first of all, with respect to Mr. Romney's advisors, I suggest you go talk to Mr. Romney about his advisors.  I would point out that we have one President at a time and one administration at a time, and I think traditionally the notion has been that America's political differences end at the water's edge.  I'd also suggest that he may not be familiar with what our suggestions to the Germans have been.  And I think sometimes back home there is a desire to superimpose whatever ideological arguments are taking place back home on to a very complicated situation in Europe.

The situation in Europe is a combination of things.  You've got situations where some countries did have undisciplined fiscal practices, public debt.  You had some countries like Spain whose problems actually arose out of housing speculation and problems in the private sector that didn’t have to do with public debt. 

I think that there's no doubt that all the countries in Europe at this point recognize the need for growth strategies inside of Europe that are consistent with fiscal consolidation plans -- and by the way, that's exactly what I think the United States should be thinking about.  The essence of the plan that I presented back in September was how do we increase growth and jobs now while providing clarity in terms of how we reduce our deficit and our debt medium and long term. 

And I think that's the right recipe generally -- not just for us, but across the board.

You had a second question.  What was it?

Q    Why are you --

PRESIDENT OBAMA:  Why am I confident?  Well, look, I don't want to sound Pollyanna-ish here.  Resolving the issues in Europe is difficult.  As I said, there are a lot of players involved.  There are a lot of complexities to the problems, because we're talking about the problems of a bunch of different countries at this point.  Changing market psychology is very difficult.  But the tools are available.  The sense of urgency among the leaders is clear.  And so what we have to do is combine that sense of urgency with the tools that are available and bridge them in a timely fashion that can provide markets confidence.  And I think that can be done. 

Hopefully -- just to give an example -- when Spain clarifies exactly how it intends to draw down and utilize dollars -- or not dollars, but euros to recapitalize its banking system, given that it's already got support from other European countries, given that the resources are available, what's missing right now is just a sense of specifics and the path whereby that takes place. When markets see that, that can help build confidence and reverse psychology.

So there are going to be a range of steps that they can take.  None of them are going to be a silver bullet that solves this thing entirely over the next week or two weeks or two months.  But each step points to the fact that Europe is moving towards further integration rather than breakup, and that these problems can be resolved -- and points to the underlying strength in Europe's economies. 

These are not countries that somehow at their core are unproductive or dysfunctional; these are advanced economies with extraordinarily productive people.  They’ve got a particular challenge that has to do with a currency union that didn’t have all the best bells and whistles of a fiscal or a monetary union, and they're catching up now to some of those needs.  And they just need the time and the space to do it.  In the meantime, they've got to send a strong signal to the market, and I'm confident they can do that.

All right.  Thank you very much, everybody. 

END
6:12 P.M. MDT

The Los Cabos Growth and Jobs Action Plan

Risks and uncertainty in the global economy have increased substantially. Our collective focus now is to strengthen demand, growth, confidence and financial stability in order to improve employment prospects for all of our citizens. We have agreed today on a globally coordinated economic plan to achieve those goals through our Framework for Strong, Sustainable and Balanced Growth. This plan, which incorporates and extends the Cannes Action Plan, significantly intensifies our efforts to achieve a stronger, more durable recovery. The Los Cabos Growth and Jobs Action Plan starts from the premise that cooperation and coordination will result in better economic outcomes. We are united in our commitment to take strong and decisive action to deliver on the commitments set out below.

We have agreed that, in light of what are perceived to be the most significant risks, our policy actions should focus on:

• Addressing decisively the sovereign debt and banking crisis in the Euro Area. The Euro Area authorities have taken a number of relevant and critical actions that have helped to stabilise the situation, however, significant risks remain and further action is required.
• Ensuring financial stability, including dealing with the potential impacts of deleveraging.
• Boosting demand and economic growth, and reducing persistently high and rising unemployment in many advanced economies, especially among young people.
• Ensuring the pace of fiscal consolidation in advanced economies is appropriate to support the recovery, taking country-specific circumstances into account and, in line with the Toronto Commitments, addressing concerns about medium-term fiscal sustainability.
• Dealing with the possibility that geopolitical risks might lead to a supply-induced sustained spike in oil prices, in an environment of limited spare capacity and modest inventories.
• Ensuring emerging markets maintain a strong and sustainable growth path that contributes to the global recovery and quality job creation.
• Resisting protectionism and keeping markets open.

Our ability to successfully address these risks is influenced by our ability to take stronger actions to promote stability and growth, and reduce ongoing imbalances, including by encouraging the rotation of demand from the public to the private sector in countries with fiscal deficits and from the external to the domestic sector in countries with current account surpluses. We are in full agreement that we need to intensify our efforts to reduce both internal and external imbalances.

As we agreed in Cannes, we have established the Los Cabos Accountability Assessment Framework (Annex A) to assess progress in meeting commitments toward our shared goal of strong, sustainable and balanced growth. This Framework is based on three pillars. First, guiding principles to ensure the assessments are: country-owned; based on a comply or explain approach; concrete; consistent across members; fair; open and transparent. Second, a peer review process that includes review and discussion of members’ policies and in-depth assessments from the international organisations. Finally, annual reports to Leaders summarising the outcomes of the assessments.

We have conducted our first assessment under this framework (Annex B). We have agreed that the commitments set out in the Cannes Action Plan to promote recovery and lay the foundation for robust growth and job creation remain broadly appropriate. The recent intensification of risks, however, has increased the importance of implementing and building upon the Cannes commitments. Progress has been good in meeting some elements of the Cannes Action Plan, but in several areas more progress is needed. We will undertake ongoing accountability assessments and improve our tracking of measures to assess progress as set out in the Los Cabos Accountability Framework.

The Los Cabos Action Plan, as set out below, includes a combination of policy measures, with short- and medium-term impacts, in order to ensure that policy credibility is enhanced and to reflect the different capacities of countries to respond in particular areas.

Addressing Near-term Risks, Restoring Confidence, and Promoting Growth

Central to this plan is a common agreement that the strongest actions to minimize risks and spur growth are those that promote the stability and proper functioning of our financial systems, supported by fiscal and monetary policy actions.

To address near-term risks, promote confidence, ensure economic and financial stability, and bolster the economic recovery, we have agreed on the following actions.

1. The Euro Area members of the G20 will take all necessary measures to safeguard the integrity and stability of the area, improve the functioning of financial markets and break the feedback loop between sovereigns and banks.
• We welcome the significant actions taken since the last summit by the Euro Area to support growth, ensure financial stability and promote fiscal responsibility. In this context, we welcome Spain’s plan to recapitalize its banking system and the Eurogroup’s announcement of support for Spain’s financial restructuring authority. The adoption of the Fiscal Compact and its ongoing implementation, together with growth-enhancing policies and structural reform, are important steps towards greater fiscal and economic integration. The imminent establishment of the European Stability Mechanism is a substantial strengthening of the European firewalls.
• We fully support the actions of the Euro Area in moving forward with the completion of the Economic and Monetary Union. Towards that end, we support the intention to consider concrete steps towards a more integrated financial architecture, encompassing banking supervision, resolution and recapitalization, and deposit insurance.
• Euro area members will foster intra Euro Area adjustment through structural reforms to strengthen competitiveness in deficit countries and to promote demand and growth in surplus countries.
• The European Union members of the G20 are determined to move forward expeditiously on measures to support growth including through completing the European Single Market and making better use of European financial means, such as the EIB, pilot project bonds, and structural and cohesion funds, for more targeted investment, employment, growth and competitiveness, while maintaining the firm commitment to implement fiscal consolidation to be assessed on a structural basis.

2. Fiscal policies in all of our economies will focus on strengthening and sustaining the recovery in a manner which promotes fiscal sustainability and enhances policy credibility.
• Advanced economies are generally on track to meet their near term commitment to halve deficits between 2010 and 2013. Advanced economies are committed to meeting the medium term Toronto commitments by implementing credible medium-term fiscal consolidation plans.
• Recognizing the need to pursue growth-oriented policies that support demand and recovery, the United States will calibrate the pace of its fiscal consolidation by ensuring that its public finances are placed on a sustainable long-run path so that a sharp fiscal contraction in 2013 is avoided.
• Japan will implement reconstruction spending as expeditiously as possible.
• Australia, Brazil, Canada, China, Germany, Indonesia, Korea, the UK and the US are allowing automatic fiscal stabilisers to operate, taking into account national circumstances and current demand conditions.
• Italy will deliver on its agenda of frontloaded fiscal consolidation accompanied by growth-enhancing measures.
• Fiscal policy in Spain will remain focussed on consolidation.

3. Monetary policies will remain focused on maintaining price stability and sustaining the global economic recovery. In this context, the actions taken by central banks in advanced economies have played an important role in promoting global economic growth and stability. Central banks will remain vigilant and take action as appropriate to achieve their objectives.

4. Our central banks, financial market supervisors and treasuries will remain in close dialogue and will cooperate through the FSB to maintain financial stability during this period of heightened uncertainty. We will maintain momentum on the financial sector institutional reforms needed to safeguard our financial systems over the medium term while taking appropriate actions to protect credit channels and the integrity of global payment and settlement systems.

5. Should economic conditions deteriorate significantly further, Argentina, Australia, Brazil, Canada, China, Germany, Korea, Russia and the US stand ready to coordinate and implement additional measures to support demand, taking into account national circumstances and commitments.

6. Emerging markets will adjust their macroeconomic policies to support domestic demand, while ensuring price stability. When and where appropriate, macro-prudential measures will also be used to help manage domestic credit growth and liquidity.

7. Recognizing that geopolitical risks might lead to a supply-side induced spike in oil prices, in an environment of limited spare capacity and modest inventories, members stand ready to take additional actions as needed. We welcome the commitments by producing countries to ensure adequate supply. In particular, we welcome Saudi Arabia’s readiness to mobilize, as necessary, more than 2.5 million barrels per day of existing spare capacity.

8. In all policy areas, we commit to minimize the negative spillovers on other countries of policies implemented for domestic purposes. We reaffirm our shared interest in a strong and stable international financial system and our support for market-determined exchange rates. We reiterate that excess volatility and disorderly movements in exchange rates have adverse implications for economic and financial stability.

Strengthening the Medium-term Foundations for Growth

All members agree to build on the 6-point plan developed in Cannes to boost confidence, raise global output and create jobs, focussing on priority areas.

1. Advanced economies will ensure their fiscal finances are on a sustainable track.
• Recognizing the importance of strengthening and implementing their medium-term fiscal consolidation plans, the US and Japan commit to actions that will lead to steady reduction in their public debt-to-GDP ratios:
• The US commits to placing its federal debt-to-GDP ratio on a firm downward path by 2016 through a balanced approach.
• Japan reaffirms its commitment to meet its primary balances targets for FY2015 and FY2020, and to reduce its debt-to-GDP ratio from FY2021 onwards.
• By our next Summit, members agree to identify credible and ambitious country-specific targets for the debt-to-GDP ratio beyond 2016, where these do not currently exist, accompanied by clear strategies and timetables to achieve them. These strategies will consider tax and expenditure reforms, including modifications to entitlements.

2. We will intensify our efforts to rebalance global demand, through increasing domestic demand in countries with current account surpluses, rotating demand from the public to private sector in countries with fiscal deficits and increasing national savings in countries with current account deficits.
• The reduction of structural fiscal deficits and actions to promote private savings in advanced economies with current account deficits will contribute to a lasting reduction in global imbalances (US).
• We reaffirm our commitment to move more rapidly toward market-determined exchange rate systems and enhance exchange rate flexibility to reflect underlying fundamentals, avoid persistent exchange rate misalignments, and refrain from competitive devaluation of currencies. We recognize the important decisions to increase the fluctuation bands for the exchange rates in China and Russia. China is building on its commitment to gradually reduce the pace of reserve accumulation, and to allow market forces to play a larger role in determining movements of the RMB and to increase the transparency of its exchange rate policy. We welcome China’s commitment to continue exchange rate regime reform.
• Emerging markets will take further actions to rebalance demand, including by: continuing to promote the liberalization of interest rates (China); and, increasing investment (Brazil) and savings rates (Turkey).
• Advanced surplus economies or those with relatively weak private demand will help promote domestic demand through the further liberalization of service sectors ( Korea, Germany, Japan); encouraging investment through eliminating inefficiencies (Germany); and, creating new industries and new markets through innovation in areas such as environment and healthcare (Japan). The recent developments in private households’ real income in Germany will help strengthen domestic demand and accelerate internal rebalancing within the Euro Area.
• Oil-exporting countries will continue to pursue productive public investment and encourage private investment, which will have positive regional and global spillover effects, while ensuring fiscal sustainability given the volatile nature of revenues.

3. In Cannes, countries put forward structural reform commitments to boost and sustain global demand, foster job creation, contribute to global rebalancing and increase the growth potential in all G-20 countries. These remain core priorities going forward and are reflected in additional reforms and commitments made since Cannes. These reforms include:
• Labour market reforms to increase employment and increase labour force participation, such as: retraining long-term unemployed (US); skills development (Spain); increasing wage flexibility, such as decentralizing wage setting (Italy); reducing labour tax wedges (Brazil, Italy); reforms to employment insurance to make it more effective and efficient in supporting job creation (Canada); enhancing education, training and skills development (Australia, Canada, France, Germany, Italy, Turkey, South Africa); encouraging the participation of females in the labour force by, for example, reforming benefit systems and providing affordable child care services (Australia, Germany, Japan, Korea); improving employment opportunities for targeted groups such as youth and persons with disabilities (Canada, Korea, UK); encouraging the participation of younger workers through apprenticeships (UK); and, encouraging formal sector employment through better education or skill development (Brazil, Indonesia, Mexico, South Africa).
• Product market reforms to promote competition and enhance productivity in key sectors (Australia, Canada, France, Germany, Italy, Mexico);
• Actions to promote the stabilisation of the housing sector (US).
• Providing targeted support for the poor or strengthening social safety nets (India, Indonesia, China, Mexico, Saudi Arabia, South Africa).
• Phasing out distortive subsidies in the medium-term where they exist in both advanced and emerging economies.
• Tax and benefit reforms to enhance productivity and improve incentives to work (Australia, Germany, Italy, UK);
• Planning regulation reforms to better support economic growth by reducing the burdens facing businesses wishing to expand (UK);
• Encourage further trade liberalization through unilateral tariff elimination in key sectors (Canada);
• Promote investments in infrastructure to increase productivity and living standards in the medium term by addressing bottlenecks (Argentina, Australia, Brazil, India, Indonesia, Mexico, Saudi Arabia, South Africa, UK); and,
• Commitments to promote green and sustainable growth (Australia, Korea, Germany, Mexico).

4. We have made substantial progress in strengthening financial sector regulation and supervision. Current global economic challenges underscore the need to reaffirm our commitment to the effective implementation of the agreed financial reforms in order to make the financial sector more resilient, stable and able to support economic growth. We welcome the FSB’s work, in conjunction with the IMF and the World Bank, identifying the extent to which agreed regulatory reforms may have unintended consequences for EMDEs. G-20 members continue to look to the FSB, in cooperation with standard setters, to monitor progress, reporting back on a regular basis. This will be complemented by efforts to increase financial inclusion.

5. We reaffirm our commitment to resist protectionism in all forms and promote open trade, and will take active measures to reduce the number of WTO inconsistent trade restrictive measures and resist financial protectionism.

6. Members reiterate the commitment on actions to maximize growth potential and economic resilience in developing countries, as well as the importance of fulfilling aid commitments by advanced countries, and mobilizing domestic, external, and new innovative sources of finance to meet development needs. These actions will complement the efforts of multilateral and bilateral donors, public and private partners to assist developing countries in achieving the Millennium Development Goals. Emerging market members will also promote a range of reforms to promote development, including improving the investment climate and enhancing infrastructure investment.

Details on country-specific reform commitments are posted on the Mexican Presidency’s website. We will continue to coordinate policy in the future as economic conditions evolve. We ask our Finance Ministers to work closely together in the coming months to address vulnerabilities and sustain the recovery. We will review progress against all of our commitments at the St. Petersburg Summit in 2013. 

ANNEX A:

THE LOS CABOS ACCOUNTABILITY ASSESSMENT FRAMEWORK

G-20 members have developed an Accountability Assessment Framework based on three pillars. This Framework will be used to prepare reports on progress in meeting past commitments, which will inform the development of future action plans and domestic policies.

Guiding Principles

To make sure that the Framework meets the needs of the membership, members have agreed that it be:

• Country-owned and country-led, based on the members’ assessment and with the input of independent third-party evaluations (by the IMF and other international organizations).
• Based on a rigorous comply or explain approach, which recognizes that policy actions take time and policy priorities may need to change.
• Concrete, using quantitative measures where possible to help focus the discussion and assess progress.
• Consistent across members, to ensure comparability of treatment, while at the same time allowing for country-specific circumstances where relevant.
• Fair, by encouraging an open dialogue between members through self-assessments and by providing objective, third-party analysis.
• Open and transparent, with the overall outcomes communicated to the public after agreement by the G-20.

1. A Peer-Review Process informed by Third-Party Assessments

At the core of our accountability assessment is a peer review process, in which members will assess progress made in meeting past G-20 fiscal, financial, structural, monetary and exchange rate, trade and development policy commitments. To enhance the effectiveness and efficiency of the discussions, the process focuses on those commitments across all policy areas where the coordination of policies has the most impact in reducing near term risks, and promoting strong, sustainable and balanced growth.

The peer review discussions will include the following elements:

• A review and discussion of policy actions members have undertaken to meet their commitments.
• A discussion of the global economic outlook to assess the progress being made in moving towards our objectives of strong, sustainable and balanced growth.
• An assessment of members (approximately every 2 years) against the ‘Indicative Guidelines’ that we endorsed in Cannes in order to identify large and persistent imbalances. As well, discussions of the new (or updated) External Sustainability Reports prepared by the IMF for countries where the guidelines suggest imbalances require further analysis.
• A review of reports from the international organisations (from the IMF, OECD, FSB, World Bank, ILO UNCTAD and the WTO) to enhance the objectiveness of the assessment process.

To ensure the Framework’s credibility and integrity, we task our officials with further enhancing the Accountability Assessment Framework, by looking at ways to promote peer review discussions based on a shared understanding of issues. We are committed to agreeing on a common approach to measure progress against previous commitments in the areas of fiscal, monetary, exchange rate, and other policies. As well we agree that commitments need to be specific, measurable and relevant to achieving strong, sustainable and balanced growth. We task our Finance Ministers and Central Bank Governors to review progress by their meeting in Mexico City in November 2012.

2. Regular Reports to Ministers/Governors/Leaders

The culmination of the peer review discussions will be short progress reports prepared for Ministerial meetings and regular Annual Accountability Assessments for Ministers, Governors and Leaders. These assessments would also provide critical input to inform the range of concrete policy commitments that should be included in the G-20 Action Plans. 

ANNEX B:

The Los Cabos Accountability Assessment

The G-20 launched the Framework for Strong, Sustainable and Balanced Growth in Pittsburgh in 2009 to promote the range of policy actions required to overcome the legacy of the 2007-08 financial crisis and put the global economy back on the path of strong, sustainable and balanced economic growth and robust job creation. The bold policy actions undertaken by G-20 countries in response to the crisis limited the loss of output and jobs, and launched the global recovery.

While significant policy actions have been implemented since then, our common goal of achieving strong, sustainable and balanced growth as agreed in Pittsburgh has remained elusive. It is clear that the rebuilding of public and private sector balance sheets across advanced economies will continue to constrain global growth for some time. Further, a number of risks continue to weigh heavily on global growth as outlined above. The recovery in private demand in most advanced economies remains muted. Although growth in emerging market economies has remained relatively strong, there are indications that it too is slowing. Reflecting the differential growth profiles, unemployment rates in emerging market economies have generally fallen below pre-crisis levels, while unemployment rates in advanced economies generally remain stubbornly high.

External imbalances have generally narrowed compared to the very large imbalances in the pre-crisis period. Structural policy adjustments have played a role in some countries, but the improvement also reflects cyclical effects, in particular the relatively weak cyclical position of many advanced economies and movements in terms of trade. Oil-exporting countries continue to run large and mounting current account surpluses.

On balance, developments since Pittsburgh suggest that a continued and more determined effort across all policy areas is required to meet the objectives set out when we established the Framework.

Fiscal Policy

Good progress has been achieved in meeting the Toronto fiscal commitments, although the weaker-than-expected economic outcomes has affected the fiscal adjustment paths of some countries. In some countries the credibility of fiscal policy needs to be bolstered through actions to place public finances on a sustainable medium-term path:

• Most members (Australia, Canada, France, Germany and Italy) are projected by the IMF to achieve the Toronto target to halve their deficits from their 2010 levels.1 In some cases, strong policy actions actually reduced the 2010 deficits below expected levels. Recognizing the need to pursue growth-oriented policies that support demand and recovery, the United States will calibrate the pace of its fiscal consolidation by ensuring that its public finances are placed on a sustainable long-run path so that a sharp fiscal contraction in 2013 is avoided. In the UK, the actual 2013 deficit projection meets the Toronto objective when cyclically-adjusted measure is used. Spain may miss its 2013 target, reflecting the significant weakness in the economy and the restructuring of its banking sector. Thus, a very significant structural effort and deficit reduction plan is being implemented.
• Most advanced economies are also on track to achieve the Toronto commitment to stabilise or reduce the debt-to-GDP ratio by 2016.2 The US is expected to meet this commitment in 2016 at the federal government level, but the federal government debt is expected to increase thereafter according to the IMF. Spain is expected to require additional actions to meet its target. Japan is on track to meet its own medium-term target of halving the primary deficit by FY2015 from its FY2010 level, but more action is needed to reach its long-term target to reduce its debt-to-GDP ratio from FY2021 onwards. Finally, while advanced economies had agreed to promote sustainable fiscal finances over the medium term, debt levels are expected to remain high in many countries in 2016. Further policy efforts are required to achieve sustainable public finances in the medium term, particularly in the context of population ageing.

Member countries have made progress on their commitments to implement structural fiscal reforms. The Euro Area has strengthened its fiscal frameworks with the adoption of the Fiscal Compact. Some members have delivered on their commitment to reform the pension system (Italy) and others are making progress on pension reforms (France, the UK). Brazil has approved a reform of the civil servants’ pension system. Spain has implemented a major labour market reform. Further progress is required on a range of fiscal actions across G-20 members that would both promote sustainable public finances and facilitate global rebalancing: the Euro Area needs to complete reforms to fiscal governance; and, the US and Japan need to fully implement ambitious medium-term fiscal plans. India, Indonesia and Mexico need to continue their reforms of major subsidies. Further progress on tax reform is required in many emerging and advanced economies to reduce distortions.

Monetary and Exchange Rate Policies

In advanced economies, monetary policies have played an integral role in supporting the recovery while maintaining price stability. In emerging market economies, inflationary pressures have generally eased, largely as a result of slower growth.
Since the Pittsburgh Summit, emerging market economies with relatively inflexible exchange rate regimes, under the IMF’s de facto classification system, implemented a number of important reforms. In particular, both China and Russia have widened their exchange rate floating bands. China’s exchange rate has appreciated substantially since 2005, but progress towards greater exchange rate flexibility has been less clear since the Cannes Summit, particularly given the short time that China’s most recent reforms have been in place. Reserves fell in China during the last quarter of 2011 partly owing to the narrowing in its current account surplus. Reserve accumulation resumed in the first quarter of 2012.

Emerging market countries expressed concerns that the easing in monetary policies in advanced economies is contributing to an increase in both the level and variability of capital flowing to their
economies and volatility in other financial variables, complicating macroeconomic policy management. Members generally recognised that domestic monetary policies of advanced economies are appropriately targeted to achieve domestic objectives while at the same time recognising the need to remain vigilant against possible negative spillovers of their policies.

Structural Policies

The implementation of key structural reforms is critical to strengthening growth and creating jobs, and promoting global rebalancing, such as policies that affect social safety nets and investment patterns. However, members agreed that structural reform commitments are particularly difficult to assess, in part due to the length of time it takes to implement them and witness their effects. That said, members remain committed to pursuing structural reforms as not only are some reforms able to provide employment gains in the short-term, they also boost jobs and growth domestically and have positive spillovers via trade and other linkages to help rebalance the global economy.

The OECD estimates that implementation is underway for over three quarters of all structural reform commitments, with full implementation of about one-third of all commitments. Progress in implementing reforms is broadly similar for advanced and emerging economies. However, progress across the different categories of structural reforms has been uneven and greater ambition is needed to implement the reforms that will have the greatest impact on rebalancing, job creation, and promoting stronger growth.

Several advanced economies need to make more progress on product market reforms (Euro Area, Japan). Emerging markets, in general, need to further improve the business and investment environment, which will facilitate investment in infrastructure and enhance potential growth, and foster financial inclusion. To facilitate global rebalancing: the US needs to do more to encourage private savings; Germany should implement measures to promote domestic demand; and, some emerging markets need to increase domestic consumption and improve the efficiency of investment.

Trade, Financial Sector and Development Policies

The WTO, UNCTAD, World Bank and OECD continue to monitor progress countries have made in reducing tariffs and liberalizing trading systems, including reducing entry barriers in key sectors. Most members have maintained their commitment to resist protectionism, including by addressing unfair trade practices through WTO-consistent trade remedy measures rather than ad-hoc policy responses. However, the political climate in some regions appears to be more accepting of new forms of protectionist measures, which should be resisted.

The FSB is responsible for coordinating and promoting the rigorous monitoring of the implementation of the agreed G-20/FSB financial reforms and its reporting to the G-20 under the FSB’s Coordination Framework for Implementation Monitoring (CFIM) that was established last year. This process involves intensive monitoring and detailed reporting, in collaboration with the standard setting bodies, on national implementation progress in six priority reform areas (Basel III, policy measures for G-SIFIs, resolution frameworks, OTC derivatives, compensation practices, shadow banking) as set out in the FSB’s report to G-20 Leaders. The FSB, in coordination with relevant standard setting bodies, also reports on the implementation of other agreed regulatory reforms and publishes information on the 12 steps taken by FSB members to implement them. The IMF reviews progress realized by its members via its Article IV surveillance and FSAP assessments. The FSB, in coordination with the staff of the IMF and World Bank, has prepared a study identifying the extent to which agreed regulatory reforms may have unintended consequences on emerging market and developing economies.
The World Bank, in conjunction with other international organizations, will continue to assess the growth and development agenda in developing countries, including the impact of the Framework policies and the external environment on promoting development and reducing the development gap. In addition, they continue to monitor the progress towards fulfilling commitments in this area.

Conclusion

Overall, progress has been made in moving ahead on the Cannes and previous summit reform commitments, but more progress and new actions are required in several important areas. In order to facilitate future assessments, members also recognised that policy commitments need to be as specific and concrete as possible, and need to substantively contribute towards the overall objective of strong, sustainable and balanced growth. We also agree on the need for a common approach to measure progress against previous commitments in all policy areas.

1 For consistency across members, this assessment of the Toronto commitments is based on general government deficit, using the actual deficit in 2010 and comparing to the IMF’s projections for 2013, allowing a 0.5 percentage point confidence band around the projections.

2 Using the IMF’s forecast for the general government debt-to-GDP ratio over 2015 and 2016.

Remarks by Treasury Secretary Geithner

Convention Center
Los Cabos, Mexico

2:33 P.M. MDT

SECRETARY GEITHNER:  We're encouraged by what we've heard from the European leaders today and by the broad focus around the world we're seeing to the need to strengthen economic growth.

The leaders of the G20 met here at obviously what's a challenging time for the global economy, and this matters a lot to the United States because, because of the crisis in European and the softness you're seeing in growth outside Europe, that means that in the U.S. we're not growing as fast as we need to grow.

Now, the leaders today discussed a broad range of reforms and priorities.  They reviewed progress on trade, on development, on financial reform and energy.  But the focus of the meetings were very much on the crisis in Europe and these broader challenges to economic growth. 

And the leaders in Europe are working towards the summit they have at the end of next week.  It's going to be really a critical summit for them.  And what they're trying to do is to design a framework to not just make Europe stronger for the future with reforms to build a stronger set of institutions for fiscal union --  banking union -- that's the way they describe it -- not just to make sure these economic reforms work over time to strengthen growth in Europe, but what they're also trying to do is to make sure in the very near term they're putting in place a set of measures that can help make sure that they're supporting the financial systems of Europe and they are helping make sure that countries that are undertaking these reforms -- like Spain and Italy -- can borrow at existing low interest rates.

Both those two things are very important -- not just the long-term reforms to build a stronger Europe, but the immediate steps to make sure that they're stabilizing their financial systems and making sure these reforms can really work.

Now, they've laid out a framework with a series of very important key elements, and let me just describe those key elements for you -- and you're going to hear the European leaders speak to those specific changes.

First, they all want to work in partnership with Greece to make sure that Greece is reforming within the European community. That's very important. 

Second, they are designing, as I said, the elements of what they call a financial architecture for a stronger framework to make their financial system work.  And what this means is a framework of reforms so they can stand behind their banks, provide capital to the banks that need it, make sure they're protecting the savings of their depositors.  That's the second key thing -- this focus on banking union or a broader financial architecture -- financial union.

You saw Spain move -- and it's a very good thing they did this -- to make sure they're committed, to make sure they can get some support of the capital -- the banks. 

And the third thing is the focus on economic growth, because of course, for these reforms to work in Europe over time, Europe needs to grow faster. 

As I said, you're going to hear more from the European leaders in the coming days about the specific proposals they're going to put in place.  They're negotiating towards an agreement at their summit at the end of next week. 

Now, a solution to this crisis in Europe has got to be made in Europe.  And all of us, of course, have a huge interest, a huge stake in the success of their efforts.  And we're going to continue to do everything we can to support them.

Thank you.

END
2:36 P.M. MDT

Statement by the President on the Observance of Juneteenth

On this day in 1865, two years after President Lincoln signed the Emancipation Proclamation, word finally reached the people of Galveston, Texas that the Civil War was over.  All enslaved men, women and children were now free.

Though it would take decades of struggle and collective effort before African Americans were granted equal treatment and protection under the law, Juneteenth is recognized by Americans everywhere as a symbolic milestone in our journey toward a more perfect union.

With the recent ground breaking of the first Smithsonian Museum dedicated to African American History and Culture, and the dedication of a monument to Dr. Martin Luther King, Jr. on the National Mall, this Juneteenth offers another opportunity to reflect on how far we’ve come as a nation.  And it’s also a chance to recommit ourselves to the ongoing work of guaranteeing liberty and equal rights for all Americans.