Canada's Jim Flaherty was meeting with the finance ministers of 19 other economic powerhouses Friday with two key issues dominating their agenda - a hotly debated proposal for a global bank tax and a massive bailout for Greece as it teeters on the brink of defaulting on its debts.
Flaherty is the staunchest opponent of an appeal from the International Monetary Fund for countries to unilaterally tax banks and financial institutions in order to ward off future economic meltdowns and protect taxpayers from having to bail out failing banks.
The U.S., Britain, Germany and France support the IMF plan, while Canada and Australia are among those against it. There was reportedly growing resistance to the tax from other countries during Friday's G20 discussions.
Flaherty has emerged the loudest voice opposing the tax, however, saying it makes no sense to penalize Canadian banks when none of them required any taxpayer bailouts the way financial institutions in several other countries did during the economic tailspin of late 2008.
He didn't back down on the eve of the G20 meetings, suggesting he had no intention of following the IMF's advice.
"We're a sovereign country; we can regulate our banks and our other financial institutions as we see fit," Flaherty said Thursday.
"I'm not going to impose a tax on our banks that performed well during the crisis. It seems to me a very odd thing to do, to punish our banks that got the job done admirably."
The Australian Banking Association scoffed at the IMF proposal as well.
"I think what we are seeing is domestic politics in the U.S., U.K., France and Germany being exported onto the international stage," said Steven Munchenberg, the head of the organization.
"Those countries had real problems; they had to use taxpayer money to bail out their banks, unlike Australia, unlike Canada and other countries. Now they're exporting their pain around the world."
The IMF proposal, one supported by U.S. President Barack Obama, could cost the financial sector as much as US$2 trillion. It's aimed at creating funds by taxing banks on their profits, compensation and borrowing.
The banks would then use those funds to ward off collapse in the event of another financial crisis.
Flaherty says such a move would increase instability by reducing the capital of banks. Instead, he said, the G20 should focus on rules to bolster capital requirements and cap leverage of financial institutions.
After receiving input from finance ministers, the IMF is expected to make its final proposal on the bank levy when the G20 leaders meet in Toronto in June.
Concern for Greece
Greece is another issue of grave concern at the G20 meetings. The country appealed Friday to its partners in the European Union and the IMF for a huge bailout - US$60.5 billion in emergency loans. Such a bailout could potentially be the biggest ever for any country.
"We are prepared to move expeditiously on this request," said the head of the IMF, Dominique Strauss-Kahn.
But the IMF's chief economist, Olivier Blanchard, signalled his opposition to such a bailout earlier this week when he discouraged lending money to Greece at high interest rates. He said the country should get itself out of its own financial mess.
Greece's debt nightmare has resulted in one of the worst-ever crises for the European Union since it was founded in 1993. The country's woes are also raising concerns about the financial health of other European countries, including Spain and Portugal.