INTERVIEW/ Jim Flaherty: No immediate need for G-7 to follow Obama's idea

Finance ministers from the Group of Seven (G-7) leading economies agree that the forum must redefine its role in response to a power shift to the G-20 group, which includes China, India and other emerging economic powers, Canadian Finance Minister Jim Flaherty said in an exclusive interview with The Asahi Shimbun.

At the latest meeting of G-7 finance ministers and central bank governors held in Iqaluit, Canada, on Feb. 5 and 6, participants worked to foster a more informal model for their proceedings.

Flaherty, who chaired the Iqaluit meeting, said that while the G-20 had become the world's primary economic forum, the G-7 could still play an important role in allowing candid exchanges of opinion between the leaders of developed countries.

He suggested there was no immediate need for all the G-7 nations to adopt the latest U.S. proposal on financial regulation, the so-called Volcker Rule.

"That is an example of the United States, perhaps, wanting to do more in certain areas than some other countries feel that they need to do," he said.

The following are excerpts from the interview, which was held after the G-7 meeting:

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Question: Could you tell me the historical meaning of this G-7 meeting?

Answer: The G-7 began as an informal meeting of leaders and finance ministers. It became more formalized over time: more prepared statements, more formal statements, less free exchange of ideas. And, as you know, we've been through a crisis in the past two years.

We agreed that the G-20 is the primary economic forum. The leaders agreed on that at the Pittsburgh (G-20) Summit.

Having said that, there's an important role for informal discussion, for a frank exchange of views, which is what we had this weekend in Iqaluit. The atmosphere helped, because it's very informal, no ties, no jackets, very friendly, hospitable people.

Q: So, from now on, the meeting is going to be informal one, and this is the start of the informal meetings?

A: Yes. That was the first thing that I think we all agreed on, informality. No communique. It's very important, no communique, because that makes people more free to express their views, candidly.

Q: On financial regulatory reform, there was a new American proposal and there was opposition from the European side before the meeting. How did you deal with those discussions during the meeting?

A: That's a good question. We agreed, in principle, that where financial institutions contribute to a financial crisis, to the extent that they contribute to a financial crisis, they should bear the cost of it, and not taxpayers. So, that's the principle that we agreed to.

And, that's the foundation. Different countries may choose to do more than that. The United Kingdom has some ideas. President (Barack) Obama's administration has some ideas. So does Germany. So does France.

In this country, we don't need to do more than that, because we did not have to put any public money into our banking system. But, the principle remains the same, and we agree with the principle.

Q: How about Mr. Obama's new limit on the scope and size of the banks?

A: Well, I think that is an example of the United States, perhaps, wanting to do more in certain areas than some other countries feel that they need to do. But, as I say, the important principle is that we are agreed that financial institutions that contribute to a financial crisis, to the extent they contribute to that financial crisis, should bear the cost of that contribution. And that is not a burden that should fall on taxpayers.

Q: On the China issue, what kind of discussion did you have?

A: As we generally do, there's a discussion about global imbalances. And, one of the major concerns are imbalances between currencies. And, we had some discussion about that.

But, the major discussion on that subject has to take place at the G-20 because some of the other countries that need to be at the table are at the table at the G-20, which is why it's the premier economic forum.