Receive free G20 updates
We’ll send you a myFT Daily Digest email rounding up the latest G20 news every morning.
Janet Yellen has rejected accusations that the G20 watered down its position on Ukraine over the weekend, as the US treasury secretary touted the summit of world leaders’ accomplishments in boosting funding for developing economies.
In an interview with the Financial Times, Yellen defended the joint statement agreed at the end of the summit in New Delhi, saying it was “substantively very strong” in its wording on the conflict in Ukraine.
The compromise document has been criticised for dropping some of the most aggressive condemnations of Russia’s war in Ukraine compared with the last G20 summit in Bali. The communiqué did denounce territorial acquisitions by force and attacks on civilians and infrastructure, while calling for international law to be upheld.
“The US does not see this language as in any way weakening the G20’s stance on Ukraine,” Yellen said.
“Clearly it was hard to find language that would satisfy the US and other countries but we felt we wanted strong language, and substantively strong language, and this was substantively very strong.”
Yellen accompanied US president Joe Biden to the G20 summit at a time of heightened geopolitical tensions and economic rivalries, which have pitted western nations against Russia and China, with middle-income and emerging powers caught in the middle.
Still, the US achieved one of its top goals at the meeting when the G20 agreed to boost and reform multilateral development banks for the benefit of struggling nations. This was also a priority of Narendra Modi, the Indian prime minister and host.
Biden has sought international backing for a US plan to expand the World Bank’s lending capacity by $25bn to combat challenges like climate change and pandemics — a figure which could rise above $100bn if other countries also participate.
“We care very deeply about the Global South and its development and the climate agenda and are doing everything we can to rally support”, Yellen said, adding: “President Biden is trying to put our money where our mouths are”.
Yellen said that part of the thinking behind the lending boost to the World Bank was that some countries had been feeling that the US was coming up “suddenly with billions of dollars to support Ukraine”, but disregarding “the plight of poor countries” around the world.
“That is not the case, it’s never been the case, it’s not as though our attention was diverted by Ukraine”, she said.
It also reflects a gamble by Yellen that the US can reinvigorate the mission of the international financial institutions even as the global economy becomes more fragmented.
“I’m very encouraged by what I see happening, these are institutions that have been around for a long time, they are bureaucratic, they are not that easy to move,” Yellen said.
“We haven’t really encountered meaningful resistance either from developed or developing countries to what I call the MDB evolution agenda.”
The plan is also part of a broader effort by the US to counter China’s Belt and Road Initiative, and Beijing’s economic clout across the world, which also included the announcement on Saturday of a rail, ship energy and communications corridor stretching from India to the United Arab Emirates, Saudi Arabia, Jordan, Israel and on to Europe.
Although the details of the plan will start to be worked out over the next two months, Yellen suggested the US would put money into it.
“I do believe the US stands ready to contribute to this — there will be a lot of private capital that will be involved and a lot of countries that will be willing to contribute public funds to bring in the private capital.”
Yellen is returning to the US as the Biden administration is growing increasingly confident of a “soft landing” for the economy that would avoid a recession. While the labour market has started to soften in response to the interest rate rises and tight monetary policy set by the Federal Reserve, the treasury secretary said that the slowdown was happening gradually.
“Lay-offs have not moved up really meaningfully at all — this is a healthy way for the labour market to adjust — what you don’t want to see is a downturn in which a lot of people lose their jobs and are looking for work and can’t find it”, she said.
Meanwhile, “the inflation data has been very good, inflation really looks like it’s coming down”, Yellen added.
“There is a path by which inflation can come down in the context of a strong labour market”.
However, she also noted the divergence in the economic fortunes of the US and the eurozone, where concerns about a slowdown are more acute.
“Most of Europe is doing less well than the United States,” she said.