July 9, 2020 / 1:54 PM / a month ago

EU urges more G20 cooperation on monetary, fiscal policy against COVID-19 crisis

BRUSSELS (Reuters) - Global powers should cooperate better on monetary and fiscal policy to tackle the COVID-19 economic crisis, European Union finance ministers and central bankers will tell their G20 counterparts at a meeting next week.

FILE PHOTO: European Union flags fly outside the European Commission headquarters in Brussels, Belgium, February 19, 2020. REUTERS/Yves Herman/File Photo

The group of the world’s 20 most industrialised nations should also aim for a global deal on digital taxation this year and avoid rolling back planned and ongoing financial regulation reforms during the pandemic, an EU document seen by Reuters says.

The document, which is expected to be approved on Friday after a videoconference of EU finance ministers, represents the EU position ahead of a meeting of G20 finance ministers and central bankers on July 18, chaired by Saudi Arabia.

“The G20 should support stronger international cooperation for defining the necessary monetary, fiscal and structural reform measures to ensure a safe exit” from the current crisis, the document says.

It calls on G20 partners to “reconfirm the importance of the principle of central bank independence worldwide.”

It also urges world leaders to “making the most of the green and digital opportunities in shaping the recovery.”

The 27-nation bloc is reiterating in the document its push for a global deal on a digital tax this year, despite the United States’ withdrawal from talks on the matter.

It also calls on G20 partners to stick to the financial reform agenda agreed before the pandemic, which includes work on stablecoins, which are cryptocurrencies with fixed exchange rate against a normal currency. They caught regulators’ attention when Facebook unveiled last year its Libra project.

Reforms which should also continue include the transition away from the London Interbank Offered Rate (Libor), which regulators want to replace after banks were fined for rigging it. This reform should remain firmly on the G20 agenda, the EU document says.

Market participants have said that the Bank of England’s Sonia rate which should replace Libor lacks the forward-looking variants that Libor has, making it harder to switch some contracts like interest rate swaps.

The fight against money laundering through the financial system should remain a priority, the EU document says.

Reporting by Francesco Guarascio; Editing by Toby Chopra

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