G7 finance ministers discuss aid for poor countries

Britain on Friday hosts an online gathering of G7 finance ministers, with discussions focusing on aid for the poorest nations hit by the pandemic.

Finance Minister Rishi Sunak is hosting counterparts from Canada, France, Germany, Italy, Japan and the United States for the meeting, held online owing to COVID-19.

The gathering, which began at 1200 GMT and is expected to last several hours, follows a similar event in February and comes before a G7 summit in Britain later this year.

Ahead of Friday’s huddle, Sunak held telephone talks with US Treasury Secretary Janet Yellen on the topic of development aid.

The pair discussed a possible new allocation of Special Drawing Rights, according to a statement from Britain’s Treasury.

SDRs, created by the International Monetary Fund in 1969, plays an influential role in global finance, helping governments protect their financial reserves against global currency fluctuations.

It is also used as the basis of loans from the IMF’s crucial crisis-lending facilities.

While not a true currency itself -- there are no SDR coins or banknotes -- the IMF uses it to calculate its loans to needy countries, and to set the interest rates on those loans.

“Both agreed that a new SDR allocation could form an important part of a package of support for low income countries and could be vital for securing a truly global recovery,” it added.

“The chancellor has previously signalled that progress on a new allocation would be a priority for the UK’s G7 presidency.”

Later this year, G7 leaders including US President Joe Biden will meet at a seaside retreat in Cornwall, southwest England, on June 11-13, after last year’s summit in the United States was shelved because of the coronavirus pandemic.

Britain took on the rotating G7 presidency in January with hopes for greater US cooperation, as Biden restored the United States to the Paris climate accord and the World Health Organization.

Britain will also host a UN conference on climate change, COP26, in the Scottish city of Glasgow in November, with hopes of fresh commitments towards targets for net zero carbon emissions.

Germany is working on a debt-financed supplementary budget of more than 60 billion euros ($71 billion) which will push up net new borrowing to a record high of over 240 billion euros this year due to the COVID-19 pandemic, two sources said on Friday.

The massive fiscal push is needed because of a longer-than-expected coronavirus lockdown which increases costs to help struggling companies as well as workers on job-protection schemes, two people familiar with the matter told Reuters.

A finance ministry spokesman declined to comment.

Finance Minister Olaf Scholz is expected to present the supplementary budget for this year and the fiscal framework for 2022 next Wednesday.

The federal government took on net new debt of 130 billion euros last year which so far has been the highest annual new borrowing on record in Europe’s largest economy.

The supplementary budget worth more than 60 billion euros comes on top of the initially planned net new borrowing of some 180 billion euros, the sources said.

A third wave of infections linked to a more infectious virus variant and a slow vaccination roll-out are both complicating efforts to further ease lockdown measures which in return increase the costs for the federal government as it already decided to extend various rescue and aid measures.

To allow this kind of deficit spending, parliament suspended the constitutional debt brake for 2020 and 2021 which normally limits net new borrowing to 0.35% of gross domestic product.

Scholz plans to use the budget emergency clause also next year, but finance ministry officials are still working on the volume and details of the 2022 draft budget, the sources said.

The finance minister could suggest a fiscal framework with annual net new borrowing of up to 80 billion euros for next year, Der Spiegel magazine reported.

Germany’s largest meat processor Toennies is growing and expanding as the next generation of the family is taking over, managing partners of it said on Friday, declining to comment on a report that the group was seeking a buyer.

“We do not comment on market rumours. After all, it is we who create the market and push for expansion,” Clemens Toennies and Maximilian Toennies said in a letter to staff that was seen by Reuters.

“Interested groups” were spreading sales rumours, it said.