2023-09-10 19:54:35
In a one-two punch, industrialized Western countries have taken advantage of China’s lack of presence at the G-20 summit to better position themselves vis-à-vis the rest of the world. On the sidelines of the major political event, they announced a gigantic infrastructure project that is intended to stimulate exchange between India, the Middle East and Europe. The competition with the “new Silk Road” operated by Beijing is obvious. Even though the project presented in New Delhi is only an agreement in principle, it is more than a vision. One can assume that potential providers in Germany are already eagerly putting out feelers in order to benefit from the billions in investments.
The G-20 becomes G-21
The second initiative, presented on the sidelines of the two-day meeting of the Group of 20 (which now has 21 members with the addition of the African Union), concerns the strengthening of multilateral financial organizations. The federal government announced an initiative in favor of the World Bank in the Indian capital. The aim is to empower international financial institutions to support globally important investments more closely and not just to combat poverty. “For this purpose, Germany will give 305 million euros in so-called hybrid capital to the World Bank,” reported Finance Minister Christian Lindner (FDP), who accompanied Chancellor Olaf Scholz (SPD) on the business trip to New Delhi. This is already taken into account in the financial planning.
The government in Washington has long made no secret of the fact that it wants to push back Beijing’s influence in the world. The emerging economic power in the Far East has purposefully expanded its influence in emerging and developing countries with concessionary loans and investment projects. Now America – supported by Europe and other countries – wants to do something similar to China’s Silk Road project. American President Joe Biden spoke of a “historic economic corridor”. The United States, India, Saudi Arabia, the United Arab Emirates and the European Union have therefore agreed on a corresponding declaration of intent. EU Commission President Ursula von der Leyen said the rail link will speed up trade between India and Europe by 40 percent.
Support critical regions of the world
Biden’s security advisor Jake Sullivan is quoted as saying that the project aims to promote growth in critical regions of the world. Among other things, integration will be improved throughout the Middle East. “Some unlikely partners” are involved in the region. Part of the project is the expansion of power grids and energy projects. The aim is to strengthen trade in clean energy between Asia, the Middle East and Europe with power cables and a pipeline for clean hydrogen. According to American information, the plan includes hydrogen flowing from Israel to Europe. The involvement of not only Saudi Arabia but also Israel can be classified as a diplomatic feat. The project will be financed not least with the help of the EU Global Gateway initiative, which provides 300 billion euros for investments around the world over the next few years.
Expand credit scope
The second initiative, which gained momentum in India, is less flashy, but is likely to be no less important from the perspective of many countries. The planned “hybrid capital” gives the World Bank leverage with which it can raise more funds on the market. If Germany secures bonds in the order of 300 million euros, this will relieve the burden on the international financial organization. It can then use its equity to place additional bonds on the capital market in order to finance further projects. The federal government estimates that with Germany’s commitment, the World Bank will have up to 2.4 billion euros available for additional investments in global public goods, i.e. things from which everyone in the world benefits, but no one can be excluded if they do does not participate in the financing.
These special goods include, for example, climate protection or vaccination campaigns against infectious diseases. The funds announced by Lindner come from the budget of Development Minister Svenja Schulze. The SPD politician is considered a driving force behind the expanded World Bank financing. “Cheap loans are even more important when it comes to projects that not only benefit the country itself, but also the entire world,” argued Schulze. That’s why they want the World Bank to use the new funds specifically for investments in such projects – “from protecting the rainforest to building wind and solar parks to financing vaccines.” Deutsche was confident that further reforms would be decided at the annual meeting of the World Bank and the International Monetary Fund (IMF).
Published/Updated: Recommendations: 47 A comment from Nikolas Busse Published/Updated: , Recommendations: 19 A comment from Manfred Schäfers Published/Updated: , Recommendations: 11
America’s Treasury Secretary Janet Yellen had already used the stage in India on Friday to campaign for the IMF to be quickly provided with more capital without adjusting the member states’ quotas in the process, as is actually intended to increase the economic importance of the member states reflect. But that would strengthen China’s influence in the fund. That is why there is great resistance to this in Congress, which in turn has prevented the quotas from being adjusted and the IMF being strengthened for years.
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