Ministero dell'Economia e delle Finanze

Finance Ministers in dialogue
Remarks by Minister Franco

Thank you for organising this event and for inviting me here today, together with the Chancellor of the Exchequer, Rishi Sunak.

Bringing the G20/G7 issues beyond the closed door of the Ministers’ sessions is important. It is particularly so in the current critical times, when the uncertainty that we are facing warrants answers from the global leadership.

Let me start by saying that Italy and the UK – as chairs of G20 and G7 and co-chairs of COP-26 – are sharing a great responsibility as well as a great opportunity for policy coordination on some of the most crucial challenges that we are facing in 2021 and in the coming years.

The first issue is that of the economic recovery. This year, the global economy is expected to bounce back from the deepest recession since World War II. However, the recovery is still fragile and uneven across countries; furthermore, it is subject to a high degree of uncertainty.

The roll-out of the vaccination campaigns is occurring at a different pace across regions and the evolution of the pandemic is not fully under control, also on account of the new variants of the virus, so health and economic conditions remain therefore challenging.

On February 26^th, on the first G20 Finance Ministers and Central Bank Governors (FMCBGs) under the Italian Presidency, the fragile environment was acknowledged and the importance of avoiding a premature withdrawal of the support measures received unanimous consensus.

Learning from the 2008-09 experience, we must be mindful of the importance of a coordinated policy response: the withdrawal of support measures should be not only gradual but also well-coordinated. In particular, close coordination among G20 members is key.

Overcoming the pandemic and allowing our economies to go back on a path of sustained growth is a top priority for national governments as well as for the international community.

At the same time, we should not settle for a return to normal. The additional effort that we are called upon, and that the G20 is promoting, is to make the recovery sustainable, balanced and inclusive.

At the same time, we want to ensure that the world is better prepared to cope with future challenges and unforeseen shocks, especially of sanitary nature.

First of all, addressing climate challenge cannot be postponed any longer. Last year, together with 2016, was the warmest on record.

We must curb the carbon footprint of human activities. This is an expensive and complex challenge that can only be achieved with a determined collective effort. In this respect, G7 and G20 are particularly important.

The COP26 co-Presidency with the UK gives us the opportunity for pursuing the Paris Agreement commitment of containing global temperature increase below the 1.5°C threshold.

Within the G20, climate change is a cross-cutting priority across all the Finance Track activities, ranging from the inclusion of environmental risks in macroeconomic risks analyses, to the assessment of the impact of green investment on productivity, to the potential of nature-based solutions applied to infrastructures.

We also have the ambition to open a debate and make progress on a number of sensitive yet crucial topics, such as sustainable finance and environmental taxation.

The transition to a zero-emissions economy can be fostered by the financial system, given its key role in the allocation of resources.

In this context, the Presidency relaunched a dedicated group on sustainable finance – the Sustainable Finance Study Group. The Group will provide a forum on the mobilization of finance to support international sustainability goals.

We are happy that US and China have accepted our invitation to be co-chairs of this group. Our aim is to develop a multi-year G20 Roadmap with a long-term vision and coordination of work among the relevant international bodies.

Specific areas for work in 2021 may include:

• Improving sustainability reporting in order to overcome the informational challenges and achieve comparability.
• Aligning investments to sustainability goals, through the right policy mix, by developing for instance a road map towards harmonized carbon-tax/pricing policies or alternative mitigation instruments.
• Enhancing the support of International Financial Institutions to the Paris Agreement.

Finally, the dialogue on climate policy action will be taken forward in the occasion of a high-level conference gathering all relevant stakeholders, to be held on July 11th, 2021 in Venice.

Eradicating the virus is our most important immediate policy priority.

Italy is concerned about the different pace of vaccination campaigns around the world, and for this reason the Italian Presidency will promote the strengthening of a multilateral approach to guarantee an equitable distribution of safe, affordable and effective vaccines.

Vaccine distribution progress in LDCs has been slow so far, but thanks to the Donors’ and Partners’ efforts, the vaccination campaign will start soon in African countries, as the first step to guarantee that no country in the world is left behind.

However, it will still require time for the vaccines to be fully deployed. Therefore, the G20 has reaffirmed the importance of supporting all the Pillars of the ACT-A (Access to COVID-19 Tools Accelerator). ACT-A brings together governments, health organizations, scientists, businesses, civil society, and philanthropists to accelerate the development, production, and equitable access to COVID-19 tests, treatments, and vaccines.

At the same time, we must make sure that we are better prepared against similar shocks in the future.

To this end, we have just set up a Panel of High Level Independent experts (HLIP), tasked to identify gaps in pandemic preparedness, with a focus on financing aspects. We look forward to receiving their recommendations, which should be finalised by next July. The Panel is chaired by Tharman Shanmugaratnam, Lawrence Summers and Ngozi Okonjo-Iweala.

Let me conclude my remarks highlighting the importance of support to the most vulnerable countries in the G20 agenda.

As you know, the impact of the pandemic has been very different in developed and developing countries, mainly due to the presence of a huge difference between countries’ fiscal space, which, in turn, can determine very different fiscal responses.

Under the Saudi G20 Presidency last year, the international community adopted several initiatives to help address the immediate liquidity needs and balance of payments’ difficulties for the most vulnerable countries.

Under our Presidency, this year we will follow up on these initiatives.

Key milestones in the near future include the effective implementation of the G20 Common Framework on Debt Treatment and of the Debt Service Suspension Initiative (DSSI).

The DSSI has provided relevant liquidity support to some of the most vulnerable countries in the world.

The G20 has committed to evaluate by April an additional extension of DSSI to end-2021.

Yet, given the severity of the current health crisis, these efforts might not be sufficient to provide the most leveraged borrowers with adequate financial resources.

On 26 February, Ministers and Governors called on the international financial institutions to explore additional tools to meet long-term global financing and reserve needs.

Overall, we believe that a new Special Drawing Rights allocation on a large scale would help boost global reserves and support countries with foreign exchange difficulties.

We are working within the G20 to forge a consensus on a new general allocation. The IMF is expected to formulate a proposal for a general SDR allocation soon and I trust that an agreement will be reached.