Virginia Mayo, Associated Press
WASHINGTON — Something unfamiliar will be in the background as world leaders hold a summit in Russia starting Thursday: economic growth throughout the developed world.
And something will be missing: worry about a renewed financial crisis.
Leaders from 20 of the largest economies are more confident about their banking systems than at any other time since they began meeting five years ago. What's more, the economies of the United States, Europe and Japan are finally growing simultaneously.
Yet fears are rising about emerging nations, which have helped drive the global economy for years: Growth is slowing, investor money is leaving and borrowing costs are rising, in part because of higher interest rates in the United States.
The result is a more divided world than the leaders faced at previous summits of the Group of 20 major economies — a disparity that could make any major breakthroughs at the summit elusive.
Issues beyond economic ones will surely seize part of the agenda. The threat of a U.S.-led military strike against Syria, in response to what the Obama administration calls a deadly chemical weapons attack, is certain to arise. Russian President Vladimir Putin, an ally of Syrian President Bashar Assad and the host of the G-20 summit, has asked President Barack Obama to reconsider any military action.
Some countries may also take the opportunity to complain about spying by the U.S. National Security Administration.
Europe's financial crisis, and fears that the euro currency alliance might unravel, had brought focus to previous summits. The leaders first met in 2008 as the U.S. financial crisis was raging and infecting economies around the world. The United States, Europe and Japan are now economically sturdier.
"There is a stronger incentive to cooperate if you are on the brink of a crisis," says Domenico Lombardi, an economist at the Center for International Governance Innovation in Canada. Without such a threat, "each country is looking after its own domestic affairs."
After their first meetings, for example, the G-20 leaders embraced policies to try to rejuvenate the global economy. Last year, they agreed to boost the International Monetary Fund's financial resources, which had been depleted by Europe's crisis.
Now, "it's becoming more of an environment of each country for themselves," says Eswar Prasad, a former IMF official who teaches at Cornell University.
The problems engulfing emerging countries like India, Indonesia and Turkey illustrate a key challenge. The problems stem in part from expectations that the Federal Reserve will soon slow its monthly bond purchases. The bond purchases have been intended to keep U.S. borrowing rates ultra-low to stimulate growth.
Long-term U.S. rates have been rising in anticipation that the Fed will slow its bond buying. Those higher rates have, in turn, led investors to pull money from developing countries and invest it in U.S. assets. India's currency, the rupee, Indonesia's rupiah and Brazil's real, among others, have plunged in response. The rupee sank to a record low against the dollar last week.
The Organization for Economic Cooperation and Development, a Paris-based research group, said in a report this week that even as growth in developed nations is picking up, slowdowns in emerging economies will likely restrain the global economy.
Yet the advanced economies aren't likely to alter their rate policies in response to the turmoil in emerging economies. Those policies have been vital to the recoveries in the United States, Europe and Japan.
"This is not something that the G-20 can settle, because it touches at the heart of national policymaking," Lombardi says.
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