Just before the G-20 Summit on 3-4 November 2011 in Cannes, the global financial system was once again at a state of crisis. Serious and escalating problems are coming from the Eurozone and European banks that own bonds from heavily indebted European countries. While the US also is still stuck in deep economic troubles, a new balance of power within the G-20 is clearly shifting further in favour of the emerging countries. The latter might even come to the rescue of the Eurozone whose crisis is deteriorating day by day, in turn affecting emerging and other developing countries. It needs to be seen how long the general solutions being hammered out during the 25-26 October Euro summit will be able to calm the markets, given the lack of details.

Although the Greek situation is now clearly proving that undemocratic austerity measures rather than serious debt cancellation (which is finally being decided only during the latest summit) do not work but rather stifle growth and worsen the situation, other European countries such as Italy are forced to take further far-reaching austerity measures against the will of the people.

This issue of the Newsletter provides a brief overview of how the Euro crisis and bank crisis have so far been (mis)handled at European level.  It also reports on one step in the right direction: an official proposal by the European Commission (EC) to impose a financial transaction tax (FTT) at EU or Eurozone level. In contrast, another new long awaited EC proposal for better control over financial markets (MiFID) fails to deal particularly with food speculation and dis-functioning of the markets as seen during the Euro crisis.

Although the Eurozone problems will be dominating the G-20 agenda, many important financial reforms have yet to be decided on, more than three years after the crisis erupted in 2008! In Cannes, the G-20 heads of state will also decide on a framework that is supposed to avoid that too-big-to-fail banks have to be bailed out by tax payers’ money, while civil society is asking for splitting up banks. It is unlikely that strong measures will be taken to tackle an issue that France has been pushing on the G-20 agenda, namely food price volatility and a major underlying problem, namely food speculation in derivatives markets. Also on the G-20 agenda are deeper problems underlying the crisis, the global currency system, global economic and financial imbalances, the global inequality and global measures for growth.

The late and weak financial and Eurozone reform proposals on the EU and G-20 agenda expose how the undemocratic decision making processes and the neo-liberal measures are not able to deliver results, and that such multilateralism has reached its limits. As a result, people are suffering from unemployment and lack of public services due to official budget cuts. In developing countries, many hungry people are suffering from the food prices that are at record high level while it is unlikely that strong measures will be taken to tackle one of the underlying reasons of this price level, i.e. food speculation on financial commodity derivatives markets. In the US and the EU, people want to claim back the decision-making and push for alternative ways to approach the multi-dimensional crises. The Occupy movement is a new form of protest which gives momentum to existing protests, all indicating that popular discontent is on the rise. How long will decision-makers in the financial sector itself, the politicians and financial supervisors, continue to ignore these voices?