The joint declaration will ensure governments share tax information, as well as tightening loopholes that allow international firms to hide profits in supposed ‘tax havens’. Chancellor George Osbourne hailed the decision a major victory against tax dodgers in Britain; however, the agreement fell short of the hardline deal Cameron was hoping for. The prime minister was unable to convince the rest of his fellow leaders to support the UK’s proposal to publish an international registry of corporate ownership.

There was also hesitancy amongst leaders to implement an automatic plan of exchange for tax information with poor countries, too. In the end, the leaders recommended these measures be pursued on a domestic level – although both Germany and Russia appeared uninterested in pursuing such a domestic venture.

“Beneficial ownership information on companies should be accessible onshore to law enforcement, tax administrations and other relevant authorities, including, as appropriate, financial intelligence units,” the official communiqué said. “This could be achieved through central registries of company beneficial ownership and basic information at national or state level.”

Meanwhile, the leaders made a point of mentioning the issue of Syria in their official communiqué, but had clearly failed to reach a consensus on how best to address the two-year atrocity.

“We remain committed to achieving a political solution to the crisis based on a vision for a united inclusive and democratic Syria,” the leaders said. “We strongly endorse the decision to hold as soon as possible the Geneva conference on Syria.”

The message made no mention of President Assad, nor Barack Obama’s recent pledge to provide the Free Syrian Army with some degree of weapons aid. The issue was expected to be a major butting of heads at the summit, as Russia’s Vladimir Putin continues to hesitantly support the Assad regime and veto all UN attempts to intervene in the conflict.

On day one, the leaders discussed the need for a eurozone banking union, Japan’s stimulus plan and the biggest bilateral trade agreement in history.

First, the eurozone came under heavy fire for its lack of progress in establishing a banking union, which leaders said was strongly needed to strengthen the policies that keep Europe’s monetary union afloat. Angela Merkel has long been wary of such a union, presuming that the German government could be faced with an influx of liabilities if harder-hit eurozone countries join their funds together with failing banks in the future.

In response, European finance ministers are set to begin developing a comprehensive plan this week to close down the region’s troubled banks in conjunction with a new supervisory system being implemented next year by the ECB. The details of this banking union should emerge in full when EU leaders hold their summit next week.

Elsewhere, European leaders were critical of Japan’s medium-term fiscal arrangements.

Although the typically-stagnant Japanese economy is already growing substantially quicker this year than originally forecast, German Chancellor Angela Merkel expressed great doubt in Japanese Prime Minister Shinzo Abe’s fiscal recovery plan.

“For me, it was very important to hear that Japan is thinking very strongly about structural changes” Merkel said.

At present Japan’s surprising growth figures are thanks mostly in part to heavy stimulus, although it’s been suggested Abe’s strategy is simply too near-sighted and must consider currently absent aspects of flexibility within the labour market and a loosening of restrictions on how companies are able to exit poor investments. Abe made clear yesterday he was planning on focusing more on budget consolidation upon his return home.

From austerity to job creation, David Cameron, Barack Obama and European Commission president José Manuel Barroso then launched formal negotiations in an effort to hammer out the “biggest bilateral trade deal in history”. The agreement would see markets freed up on both sides of the Atlantic and create up to two million jobs across the globe, according to Cameron.

“We’re talking about what could be the biggest bilateral trade deal in history,” Cameron said. “This is a once in a generation opportunity and we are determined to seize it.”

It’s not hard to see why Cameron is pushing so hard for such a deal; in general, the UK’s domestic economic policy is largely driven by export-led growth. Facing continued frustration over the lack of progress in liberalising Doha trade policy, therefore, Cameron is hoping a major bilateral trade agreement with the US could create new jobs and lower consumer prices in the UK.  He’s currently predicting the agreement would add £100bn to the EU economy (versus £85bn in the US). Yet the fact that such a deal could provide more incentive for staying in the EU would also help to curb the high levels of hostility towards the eurozone currently hampering Cameron’s popularity in Britain.

Not everyone is excited about the deal. The French have already expressed concern over their heavily-guarded domestic film industry, nervous that freeing up trading with the US would lead to a proverbial Hollywood invasion. Consequently, the architects of the agreement have reportedly conceded that France may be able to opt-out of media-related imports and go unpunished. This has caused discordance among those in favour of the deal, who are worried the agreement could be heavily weakened should other countries decide to pick and choose which imports they do and don’t want to allow.

Barack Obama, a strong advocate of solidarity within the eurozone, has made clear that striking a trade deal is paramount, and he would use his sway to “break through logjams” if necessary.

“We must resist the temptation to downsize our ambitions and avoid the difficult issues just to get a deal,” he said. “There are going to be sensitivities on both sides. There are going to be politics on both sides but if we can look beyond the narrow concerns to stay focused on the big picture, the economic and strategic importance of this partnership, I’m hopeful we can achieve the high-standard comprehensive agreement that the global trading system is looking to us for.”

The official Bilderberg 2013 agenda listed on their website included topics of discussion such as ‘Current Affairs’ and ‘US Foreign Policy’, passing through ‘Nationalism and Populism’. So far so non-specific. There were 12 topics listed in total, each as amorphous as the last. Indeed, Bilderberg set out an agenda for three days of discussions that included topics that have divided the great critical minds and philosophers of the world for centuries. How exactly these debates were carried out, and what they achieved has not been revealed. It could be the VIP’s gathered in the mid-rate hotel in the most non-descript suburb of London cracked the issue of ‘Developments in the Middle East’, but we’ll never know.

The problem with Bilderberg is that it is an exercise in retrograde lack of transparency and accountability. Nothing that comes from an ‘off-the-records’ meeting between the CEO of Google and the British Chancellor of the Exchequer will ever be traced back to Bilderberg. If a deal was struck, or even hinted at, we’ll never know. And if it cannot be scrutinised, than there is no way of challenging if the talks were in the public interest or not.

This year the secretive meeting gathered between 120 and 150 movers and shakers. The head of the IMF, the British Prime Minister and international personalities like Henry Kissinger, and David Patreaus, were all in attendance; they were joined by the heads of some very influential global companies. Not represented of course, was the media and the general public.

A lot of the companies that attended Bilderberg are publicly owned, and many of the politicians are publically elected. The trouble with the closed doors of the Grove Hotel and Resort is that there is no way the public can know if it was being fairly represented in what can potentially be very significant discussions.

There is no room for this kind of secrecy in the business and political world. It is a throwback to the dark ages when politicians and influential persons colluded with impunity to further individual interests, to the detriment wider society.

Bilderberg flies in the face of modern conventions and best practice initiatives. In public governments demand transparency from companies over their financial dealings, tax returns and investments, but in private they are happy to jump into hotel rooms with industry leaders to have ‘off the books’ discussions on the fundamental issues of our age.

The Bilderberg Conferences have been held annually for 59 years, but the world is a very different place today than it was in the early 1950s. The conference should modernise its approach and allow the media in and publish its conclusions. What’s more politicians and executives should refuse to engage with such an old fashioned and undemocratic forum.

Hester assumed the helm of RBS following the departure of Fred Goodwin, who had led the bank to the brink of collapse. The current CEO managed the £45bn government bailout and helped the bank recover after Goodwin’s calamitous take-over of ABN Amro at the start of the financial crisis.

“Having brought RBS back from the brink, now is the time to move on from the rescue phase,” said UK Chancellor George Osborne. Hester and Osborne both insisted that the CEO was not being forced out of his job ahead of the next stage of restructuring.

“It has been nearly five years since I joined RBS after the bank was rescued by the government. In that time we have reduced the bank’s balance sheet by nearly a trillion pounds, repaid hundreds of billions of taxpayer support, and removed the imminent threat that this bank’s size and complexity posed to the UK economy,” Hester told the Today programme on the BBC. “We are now in a position where the government can begin to prepare for privatising RBS. While leading that process would be the end of an incredible chapter for me, ideally for the company it should be led by someone at the beginning of their journey.”

RBS has recently announced it will continue to reign in its investment operation, and plans to shed up to 2,000 of its 11,300 investment bankers. There are also plans afoot to purge RBS of some of its non-performing businesses, particularly its Irish subsidiary Ulster Bank. Commentators has suggested that these moves come as a direct result of the political pressure the bank has been under since its bail out.

“Our aim is to streamline the business, reduce complexity, mitigate operational risk and improve the way in which we manage our activities front-to-back,” the newly appointed heads of the investment bank, Peter Nielsen and Suneel Kamlani, said. “We plan to exit all structured retail investor products and equity derivatives, as well as peripheral market-making activities. Our business will be simpler and more efficient, reducing the complex procedures that generate operational and conduct risk.”

There has been a mixed reaction to Hester’s departure announcement with some suggesting it is the perfect time for a new leader. There have been no indications as to who will succeed Hester, as of yet.

“Over the coming months I will put all my effort into completing the final recovery and continuing to build a strong customer-focused culture. I thank all of the people of RBS for their support and wish them all the best for the future,” says the CEO.

Incumbent Chancellor Angela Merkel, leader of the Christian Democratic Union (CDU) that dominates the governing coalition, was until recently presumed to be a shoe-in for re-election. Her steady and pragmatic governing of the economy through the eurozone crisis has won praise. The centre-right coalition of her CDU party and the more liberal Free Democratic Party (FDP) has been in power since 2009, steering the country through the global financial crisis and subsequent Eurozone meltdown. Primarily in favour of a market economy, the coalition has resisted the calls of its biggest opponents, the 150-year-old Social Democratic Party of Germany (SPD), to raise taxes and reign in the banking industry.

However, growing unrest amongst many parts of the country about the government’s insistence on holding the Eurozone together and propping up of the chaotic southern European economies, has led to surprising local election results that hint at a much more closely run federal election in September. In January, the SPD’s Stephan Weil unexpectedly defeated David McAllister, the non-German sounding CDU premier for the northern state of Lower Saxony, by the narrowest of margins, getting 68 seats to his opponents 69.

Whether this local election result will be a forerunner for the federal election, or merely an anomaly that serves as a warning to the ruling coalition is unclear.

Implications for Europe
The issue of Europe, and particularly the future of the single currency, is likely to dominate the election and this is something that all of the major parties are taking great care to emphasise that they won’t be profligate with the country’s money as a way of supporting other struggling EU states.

At the same time, however, they are also wary of playing to the vocal members of the population that say the country shouldn’t be bailing out failed economies like Greece and Spain. Speaking to the Financial Times recently, Michael Roth, SPD European affairs spokesman said: “The chancellor has positioned herself in such a way that people are reassured Germany won’t throw good money after bad. Europe is too important [for us] to commit the danger of populism. [So] the SPD has pursued a constructive policy, with a very difficult debate inside the party.”

A likely outcome of the election is a more closely integrated EU. Both Merkel and her SDP counterpart Peer Steinbrück, have been quite vocal in recent months about the need for greater ties between member states to ensure a coherent strategy. Merkel has repeatedly called for closer political and fiscal union, saying as recently as June that: “We need more Europe. We do not need a currency union, we also need a so-called fiscal union – that is, more joint budget policy.”

Grand coalition
Prior to the current coalition between the CDU and FDP there was a so-called ‘grand coalition’ that included the SPD. Although SPD leaders are keen to stress the ideological differences between themselves and the CDU, the likelihood the two parties sharing power once again has increased in the last year because voters are returning to the two main parties. The Lower Saxony result in January dealt a blow for the minor parties that had been doing relatively well in recent years. The Left Party polled so low that it lost its place in the state parliament, while the rather ludicrous Pirate Party, which campaigns for internet freedom and reduced government regulations, did not manage to surpass five percent of the vote.

The Green Party, which traditionally sides with the SPD and has more in common with them ideologically, is thought to be positioning itself as a potential partner of the CDU after the election. The party managed to get one its candidates voted in as mayor of Stuttgart recently, and it is increasingly being seen as a credible alternative to the SPD on the centre-left of the political spectrum.

There is also a vocal amount of euro scepticism in Germany, with a newly formed party called Alternative for Germany calling putting pressure on Merkel from the right. Led by economics professor Bernd Lucke, the party has called for the “dissolution of the euro in favour of national currencies or smaller currency unions.”

In a statement on its website, the new Eurosceptic party adds: “Democracy is eroding. The will of the people regarding (decisions relating to the euro) is never queried and is not represented in parliament. The government is depriving voters of a voice through disinformation, is pressuring constitutional organs, like parliament and the Constitutional Court, and is making far-reaching decisions in committees that have no democratic legitimacy.”

Although unlikely to gain any significant holding in the German parliament, the strong possibility that the party will split the vote in regions disgruntled with the CDU’s policies could hand a number of seats to either the SPD or the Green Party. Such an outcome would greatly increase the chances of a centre-left coalition between the two parties.

Lurch to the left
The SPD, led Steinbrück, could bring about the biggest change in German – and European – politics. Steinbrück is politically very close to French President Francois Hollande, and has been a fervent critic of the austerity tactics imposed by Merkel, as well as higher taxes on the rich. If the SDP were to gain control of the German parliament, most likely in coalition with the Green Party, then the consequences for the rest of Europe would be grave. A rejection of austerity by Europe’s leading economy would result in international investors frantically withdrawing their money from the single market.

Some observers seem pretty confident that the political landscape is likely to see a shift to the left at the next election, with voters eager to see their government tighten regulations on the banking industry and raise taxes on the rich. This is a trend emerging across western economies, and where ordinary citizens feeling the constraints of austerity want to punish the people they think caused the distressed economies in the first place.

Hollande’s strategy has been condemned in recent months, with growth flat lining and unemployment soaring. If Germany were to go down the same path as France, austerity across Europe would inevitably be rejected.

What seems more likely, however, is a return to a ‘grand coalition’ between the SDP and CDU. AS the CDU’s traditional partner, the FDP, has been polling particularly poorly recently, Merkel’s party may need to do a deal with one of the left-leaning opposition groups to remain in power. If it were with the Greens, Merkel would likely remain Chancellor, but if with the SDP she would have to work with Steinbrück, and depending on the exact number of seats he may demand the Chancellorship for himself.

The coming months will see a lot of political manoeuvring between the parties, but as the last few years in European politics has shown, yet another economic catastrophe could happen at any time, tipping the balance of an election campaign. For the sake of the rest of Europe – and perhaps the world – it would be favourable to maintain the status quo of Merkel’s steady hand than lurching to a banker-bashing, anti-business socialist government.

The government is crediting the growth largely in part to an upward revision in capital spending, indicating newfound confidence amongst Japanese producers.

The release of these figures comes as a blessing for Prime Minister Shinzo Abe, whose economic-revival programme has seen the value of Japan’s currency plummet by almost 20 percent since November. Last week, Abe announced ‘the third arrow’ of his plan, which will authorise the Bank of Japan to launch an aggressive monetary easing campaign.

The Prime Minister’s structural reforms are likely to be strengthened further by mid-term elections next month that are predicted to increase the legislative sway of his Liberal Democratic Party. Meanwhile, analysts were confident the growth would remain sustainable for the time being, but recent drops in the Tokyo stock market left room for vigilance.

“The upward revision (for economic growth) confirmed that the Japanese economy remains on a firm recovery track,” said Hideki Matsumura, a senior economist at the Japan Research Institute. “We expect the economy will continue to grow for now but consumer spending may be dampened in the current quarter after a sizeable adjustment in the Nikkei index.”

That said, recent drops in the value of the yen have simultaneously led to a substantial increase in the value of income being made from foreign investments. Consequently, Japan’s surplus has doubled to $7.6bn, which has cushioned the damage being caused by an ever-increasing trace deficit. It is hoped these promising new figures will encourage a new influx of foreign investment, perpetuating further growth.

Bundesbank cut its December projections for 2013 from 0.4 to 0.3, and stated that growth would amount to 1.5 percent in 2014, a 0.4 percent drop on the previous estimation. The revised figures were “due mainly to downward revisions with regard to the external environment,” said the bank.

The downgrade follows the IMF’s decision to cut it’s 2013 growth forecast in half to 0.3 percent.

“Much will depend on whether the economic situation stabilises in the euro-area crisis countries and whether expansionary forces will gradually gain the upper hand there,” said the central bank’s President, Jens Weidmann. “A sustained upturn in the world economy is just as important as a precondition for the growth path we have assumed.”

Europe’s largest economy narrowly escaped recession through the first quarter, posting 0.1 percent growth, the likes of which was in large part due to private consumption having offset disappointing exports.

The bank wrote in a related statement: “In the euro area the economy appears to be bottoming out. Nevertheless, the Bundesbank sees continuing structural problems as standing in the way of a rapid improvement. This is likely to place a major strain on the German economy, which is integrated into the international division of labour.

“Consolidation and reform efforts appear to be slackening. This could have a negative effect on the financial markets and further intensify the debt crises. Confidence would then be further eroded, which would also have negative consequences for the cyclical outlook for the German economy.”

The bank anticipates the euro area to offer “no meaningful stimuli” to the German economy until 2014 at the earliest. However, despite the euro-area crisis, Bundesbank expect Germany to later this year demonstrate a modest recovery, in large part due to a robust labour market, significant wage increases and slowing inflation.

The bank’s inflation figures were revised upwards this year to 1.6 percent from 1.5 percent, though reduced to 1.5 percent from 1.6 percent for 2014.

The original plan was to levy sanctions of up to 47 percent on solar panels imported from China, which are being sold below cost in the EU. However, though the EC remains committed to tackling what it perceives as dumping, the 11.8 percent rate announced by Trade Commissioner Karel de Gucht is far below what was expected. The lower tariff will only be applicable for two months, to give China time to deal with the issue.

“This is a one-time offer to the Chinese side, providing a very clear incentive to negotiate,” De Gucht told a news conference. “It provides a clear window of opportunity for negotiations, but the ball is now in China’s court.”

The solar panel case has become the largest dumping dispute brought by the EU and is being seen by some as symbolic of a growing impasse between Brussels and Beijing. China is seen to be using its state power to assist in Chinese companies to break into the European market unduly. China has been lobbying heavily against the sanctions and officials have warned of the possibility if a trade war if Europe does not back down.

“If we face a loaded gun to our heads, it is not a fair negotiation,” one Chinese source told Reuters. “But at least it created room for both sides to find a solution.”

The lower tariff will only be applicable until August 6, to give China time to deal with the issue. If a settlement has bot been reached in that time, the levy will go up to 47.6 percent, which would effectively block access to the market by Chinese solar panel importers. The lower sanctions are an attempt by de Gucht to demonstrate to member states reluctant to challenge China that the commission is attempting to negotiate in good faith, but is willing to stand its ground if faced with resistance.

“The truth is, we are loading the gun now,” one EC official told the FT. “Eleven bullets now, 47 on August 6.”

De Gucht maintains that the dispute is not about protectionism, and defended the sanctions as a way to provide “life-saving oxygen” for the European sector affected by impossibly low-cost Chinese imports. “This is not protectionism, rather it is about ensuring international trade rules [apply] to Chinese companies.”

In 2012 the US passed similar sanctions against Chinese solar panel imports. The EC has been investigating for some time alleged illegal subsidies for China’s solar industry, after complaints by a German solar panel manufacturer.

Governor Kuroda, officially appointed in March, is in favour of employing a looser monetary policy to help steer the country’s economy toward sustained economic growth. Prime Minister Shinzo Abe’s strategy so far has to use heavy fiscal stimulus to spur growth, but some within the BOJ’s board are concerned about the level of easing being used.

Interest rates were lowered in April after Governor Kuroda’s first meeting in office, while a target of two percent inflation was settled on. However, since then bond prices have plummeted and the market has remained volatile. Some within the BOJ are unhappy with the inflation target, according to minutes from a meeting on April 26.

The minutes stated: “A few members said it was tough to achieve two percent inflation in the latter half of the forecast period as there is uncertainty over how changes in future inflation expectations will actually push up prices.”

Speaking to Reuters, Yasuhide Yajima, chief economist at NLI Research Institute in Toyko, said differences in opinion were to be expected after such radical reforms: “Given how extreme the April easing step was, it’s natural for disagreements to exist within the BOJ.
“Failure to meet the price target will test the BOJ’s credibility. But the bank’s policy itself is contradictory. When expectations of inflation heighten, bond yields will rise. The BOJ can’t really do anything to stop that.”

The world’s third largest economy has struggled to address the deflation that has set in since the 1990’s, known as ‘The Lost Decade’, due to the asset price bubble.

Between 2003 and 2007 global annual GDP grew by an average of five percent with China consistently breaking the ten percent mark. But not all of the BRICs were as adept at reinvesting and developing their infrastructure. Internal investment in infrastructure is a huge part of China’s growth model; between 2003 and 2007 the country built over 1500 skyscrapers reaching over 30 storeys. Shanghai, a city without a subway system until 1995 now has 454km of underground railways, compared to 402km in London, which has been developing it’s network for a century. São Paulo, Latin America’s largest city, by contrast, still only boasts 74km.

Brazil, Russia and India grew rapidly by peddling their rich resources to the rest of the world. Between 1990 and 2002 Brazil exported on average $54bn worth of commodities every year- between 2005 and 2011 exports tripled to $111bn. During that period 40 million Brazilians were lifted out of poverty, a further nine million people joined the upper middle classes. Demand for new homes and cars exploded. But “God is not creating new land around,” explains Emilio Haddad, an engineering professor at the São Paulo University (USP). “The urban land offering in Brazil is scarce.” But as people made more money, more credit became available to them, so soaring housing prices were not a problem for a time. Now Rio, São Paulo, Shanghai, Moscow and Mumbai are constantly topping lists of cities with the most expensive cost of living.

Infrastructure deficit
But the housing boom, and soaring cost of living is also a good example of the huge infrastructure deficit that some of the BRICs have been building up over the years – with the notable exception of China. In Brazil and India, building and houses are still erected with the same basic tools and techniques developed thousands of years ago: brick by brick. Bricks, manufactured out of a variety of clays are cemented together, usually by hand; whereas in Europe and North America the pre-fabricated model is predominant, both for its efficiency and its lower costs. This way, a factory will manufacture concrete or ceramic slates and builders simply assemble the structure at the site. According to one Brazilian engineer it takes 42 months and 1500 workers to build two 35-floor towers, whereas in the US “a build of this magnitude takes 30 months and half the workers,” Alessandro Vendrossi, told a local magazine recently. In China there are building techniques to erect a 30-storey tower in as little as two weeks.

In Brazil, Russia and India there has been a notable lack of investment in the modernisation of the industrial sector. Conversely this type of investment corresponded to 48 percent of GDP growth in China in 2012. That means that almost half of what it produces is designed to enable China to produce even more. Brazilian economist Alexandre Versognassi explains “a third of the steel China produced during the ‘golden years’, much of it using Brazilian iron ore, was used in the construction of new steel plants.”

On average emerging markets invest 31 percent of their GDP on these types of projects. Mongolia, which is experiencing something of a commodities boom, invested 51 percent of its GDP in 2012 in infrastructure. Brazil invested 19 percent, just marginally behind Russia that invested 20 percent of its GDP. India invested around 35 percent. These low investment rates are a problem particularly for Brazil and Russia. Their investment levels are on par with developed countries like Switzerland, Belgium and Finland, whose infrastructure far exceeds that of the two BRICS and thus require less to keep growing.

Brazil currently has 29,800km of railways, which are almost exclusively used for the transport of goods; 10,000km of these were build by the country’s last emperor Pedro II.

Brazil has been a republic since 1889. This means that the country’s vast resources are transported to the ports by truck. It costs almost five times more to transport a tonne of soy in Brazil than in the US. Brazil, though not quite as vast as China or Russia, is a very large country, and one that should not be wasting money on the transport of goods. Between 2007 and 2011, China laid over 19,000km of train tracks and is now considering developing the network into high-speed rail lines. Russia boasts 128,000km of tracks. Even India has 63,000 route kilometres.

Too much or too little but never enough
When Moody’s Investor Services became the only major international rating company with a stable outlook for India, they assumed that investment in infrastructure would increase over the next year, despite the economic slowdown. In their report they suggested the country’s chronic lack of investment “has hurt potential growth, as well as the competitiveness of its export and import-competing sectors, this contributing to its trade and current account deficits. Moreover, poor infrastructure discourages foreign direct investment inflows, which could finance these deficits and stimulate growth.

Infrastructure deficiencies also heighten the supply bottleneck that fuel inflation.” Brazil and Russia suffer similar issues despite having more favourable investment outlooks.
As countries like Indonesia and Turkey sustain growth rates that far exceed those of India, Brazil and Russia, these BRICs must question if their lack of investment will prevent them from emulating their own previous success. The astronomical growths of the early 2000s will have been nothing but a blip in the radar if these countries don’t start building the platforms for consistent and stable growth.

Of course, though China’s model of high investment rates has been a success so far, the dramatic slowdown in growth the country experienced last year highlights how it has become an economy based on investment alone is unsustainable. China is now struggling to turn itself around and become more of a consumption-led economy, like Brazil, India and Russia. “China’s economic model relies too heavily on the government and not enough on the private market,” explains Brian Liu, from the University of Pennsylvania. “The problem with such reliance is twofold. The first is that it reduces GDP growth in the long run by restricting the creativity and innovation that is inherent in a more open market.  The second is that such unbalanced economic growth isn’t sustainable.”

The difference between China and the rest of the BRICs is that over the past two decades it has raised the standard of living, education, and developed the platforms from which to spring forward. Though it will not survive on building platforms forever, and must now take the leap into smaller but more sustainable growth rates. India, Brazil and Russia must invest in these platforms in order to make the most of their resource wealth and endure times of low demand and prices without breaking the bank.

To read more on BRICs, pick up the July – August issue of World Finance, available in good newsagents in June

According to PwC “emerging and developing economies continue to be in the ‘fast lane’”. According to their internal analysis BRIC countries will continue to grow at least three times as fast as the G7, “the release of the first quarter GDP data for China confirmed our view that it will continue to grow slightly faster than the 7.5 percent government target rate (actual growth was 7.7 percent year on year), whilst gradually rebalancing from investment to consumption-led growth.”

Christine Lagarde suggested in a speech at the Economic Club of New York that the US and Switzerland were ‘on the mend’, creating the medium growth rate bracket. PwC estimates that the US will grow around two percent in 2013, buoyed by sustained job creation.

Lagarde has warned that this level of imbalance is “starker than ever.”

“In far too many countries, improvements in financial markets have not translated into improvements in the real economy – and in the lives of people,” she said. “We are now seeing the emergence of a ‘three-speed’ global economy—those countries that are doing well, those that are on the mend, and those that still have some distance to travel.”

Countries in the eurozone continue to struggle, as the banking industry is still not fully repaired, and vital fiscal and monetary reform has failed to materialise. “Monetary policy is ‘spinning its wheels’—meaning that low interest rates are not translating into affordable credit for people who need it,” said Lagarde. “The plumbing is clogged up, and we are seeing more financial fragmentation.

“So the priority must be to continue to clean up the banking system by recapitalizing, restructuring, or, where necessary, shutting down banks. The oversize banking model of too-big-to-fail is more dangerous than ever. We must get to the root of the problem with comprehensive and clear regulation, more intensive and intrusive supervision, as well as frameworks for orderly failure and resolution, including across borders, and with authorities empowered to oversee the process,” she added.

During the Spring Meetings Lagarde emphasised that job creation should be a priority for policymakers in order to combat the deep growth inequality plaguing Europe. “Every policy maker is keen to develop jobs and to respond to the demands of the young population in particular,” she said. All job creating policies should be considered, “starting with growth and good polu mix which relies on not just one policy but a set of policies that ill include fiscal consolidation at the right pace, structural reforms and monetary policy, which provides the breathing space,” she added.