The G20 leaders' two-day-long summit kicks off on Thursday at 13:00 London time in St. Petersburg, Russia, with discussions expected to focus on topics as wide-ranging as policies to promote growth, financial sector regulation, the conflict in Syria or the impact of Fed tapering on emerging markets.
"The key objective of the G20 at this moment, given the continuing instability in the financial markets, unemployment remaining high and persistent global imbalances, is fostering strong, sustainable and balanced growth," touts the official agenda statement.
However, the statement goes on to mention a barrage of other "issues" such as financial stability, quality job creation, tackling unemployment, the search for new sources of growth and investment financing, as well as strengthening multilateral trade and international development assistance.
Despite the official agenda, markets appear to be more interested in the topics that are expected to be discussed "at least" on the sidelines. Officials have also confirmed that they will be discussing financial sector regulation with a focus on bringing the so-called "shadow banking" under control. The lack of transparency in the opaque parallel financing market was one of the major causes of the financial crisis.
Effect of Fed tapering
Furthermore, several leaders have already discussed their concern about the impact of the Fed's plan to reduce its quantitative easing. The reduction in monthly purchases of bonds from the current $85bn, known as tapering, is a particular worry of emerging markets. China's Deputy Finance Minister Zhu Guangyao told a briefing on Thursday that the Fed's reduction would have a global impact causing capital flight and currency depreciation in emerging markets. Along the same lines, Russian officials noted "significant risks if monetary stimulus starts to be wound down".
In any case, Russian Deputy Finance Minister Sergei Storchak stated on Thursday that the G20 end-of-meeting communique would not differ from the previous one with regard to changes in monetary policy. "It's not going to be more than the agreements that were reached in Moscow (where the last summit was held)," he said in an interview with Reuters.
Also on the "unofficial" agenda, discussions are expected to be held over the current situation in Syria. Tensions between US authorities who urge military action and Russian leaders who are insisting that a decision on action be withheld until proof is found of chemical weapons use and the UN gives approval for intervention.
Russian leader Vladimir Putin gave an address on August 28th in which he played on the importance of the two-day meeting. "I am convinced that the forthcoming leaders' summit in St. Petersburg will reaffirm the G20's role as an efficient mechanism for coordinating the world's leading economies' policy approaches to global economy and finance," he said. Putin also made sure to note that he anticipated "further progress".
Yet strategists at Capital Economics are quick to put this "efficient mechanism" in its place: "Investors have long ago learnt to expect little of substance to emerge from the formal meetings of G20 leaders and finance ministers.
"The group is too large and disparate to function as an effective decision-making body and it has no means of enforcing any decisions which it does make."