G20 summit will not mend world financial crisis

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With two weeks to go before the G20 leaders' summit in London, expectations have been deflated by a patent lack of progress. Grandiose talk of a "Bretton Woods II" has vanished. And as with the previous leaders' summit in November 2008, no agreements that would imply significant changes to the international financial architecture are expected, according to Internet.
The possibility of a grand bargain, which would include coordinated monetary and fiscal measures, agreements on financial regulation, progress on trade liberalisation and the overhaul of international financial institutions, has also faded away.
US transition brake. The US government changeover on Jan. 20 can partly be blamed for the lack of progress. The fact that many key positions in the US Treasury Department lack nominees or have proposed occupants awaiting Senate confirmation has further exacerbated the situation, with a demanding vetting process causing several potential nominees withdrawing from consideration.
At the same time, President Barack Obama's administration has been preoccupied with domestic concerns, only recently giving more attention to international issues related to coordination over the financial crisis and global downturn.
Multi-speed G20. Although the originally expected "big bang" is highly unlikely, several important concerns will make progress at the G20, though at varying speeds:
Stimulus disagreement. A sign of how difficult it will be to reach accords is the rift that erupted between the US administration and European governments on the size of the fiscal stimulus to be applied by countries, with the former demanding greater fiscal stimuli than those already announced. Europeans have refused, arguing that their generous welfare arrangements already provide additional expenditure in an economic downturn.
Futile role for IMF. On April 2, the G20 will probably endorse the agreement reached at a ministerial meeting held on March 14, to the effect that the IMF should monitor the fiscal stimuli being implemented. IMF Managing Director Dominique Strauss-Kahn was an early enthusiast of such monitoring.
However, the Fund lacks the capacity and willingness to push any country to go beyond what it considers fiscally adequate. After strong pressures by the former US administration in 2007, the IMF adopted new exchange-rate surveillance guidelines to press China to float the renminbi. The guidelines failed, showed the institution to be biased and caused a falling out with China that persists to this day. It is improbable that Strauss-Kahn will try to repeat such a strategy with regard to European fiscal policy.
Even with expectations considerably lower, the G20 may still lose its credibility as a forum, as clear commitments made in the November summit have been broken, are still to be fulfilled or have been implemented slowly: