Optimism about the economic situation could actually reignite the financial crisis, says ACCA (the Association of Chartered Certified Accountants) in its position paper Complacency vs. Reform released in advance of the next G20 summit meeting on 24 – 25 September in Pittsburgh, USA.
Helen Brand, chief executive of ACCA, says: “The challenge for G20 leaders is to achieve balance while keeping the agenda moving at a steady pace. Economic indicators from the IMF and World Bank are still predicting declining growth and contracting output around the world. Although the steps taken so far may be beginning to yield results, much more work is still needed to ensure recovery.”
ACCA says that leaders and economic policy-makers also face the threat of waning momentum for change. Helen Brand adds: “There is a danger now that the impetus for radical and necessary change will be lost. This could result in the global economy emerging from this recession looking much as it did before, only smaller and with more people unemployed and angry.”
ACCA wants to see four key issues resolved at the G20 meeting:
- Reform of Bretton Woods institutions: This has to be implemented more quickly so that developing economies, such as China and Brazil, feel more represented and can efficiently pursue their primary objectives, i.e. stability of the international financial system and the fight against poverty.
- Regulation and Fair Value accounting: ACCA does not believe that fair value caused the financial crisis. The G20 must show leadership and commitment to the principle of an accountable, transparent and sound system of international regulatory cooperation. The globalisation of business means that one set of reporting standards, the principles-based IFRS, is essential. ACCA also warns against political interference in the setting of international standards - the reliability and predictability of accounting standards are key prerequisites for a sustainable and well-functioning capital market, and robust and credible accounting standards are essential for a speedy recovery from the financial crisis.
- Supporting Small Businesses around the world: SMEs (Small and Medium-Sized Enterprises) are vital to driving economic recovery through the role they play in creating jobs, innovation, and macroeconomic growth. It is crucial that G20 Government leaders recognise the importance of SMEs and find more ways to collaborate and partner with business, civil society and governments in encouraging institutional changes to help improve the operating environment for SMEs.
- Investing in a low carbon economy: ACCA is concerned with the lack of concrete proposals to invest in a low carbon economy that have come out of the two previous G20 Summits. While politicians struggle to retain votes and work economies out of recession, it is crucial that they acknowledge the climate crisis as well. Acting early, as key policy documents, economic forecasts and project proposals are urging, will raise our chances of diverting catastrophe at a reduced financial and environmental cost, while building a strong green economy.