The most concrete development that emerged from the G-7 meeting held in Germany's Bonn between May 18 and May 20 is that the world's seven leading countries have agreed to provide financial aid of $19.8 billion to Ukraine throughout 2022. At the same meeting, the topic of potentially confiscating Russia's worldwide financial assets and using this resource to counter the destruction of the infrastructure and superstructure in Ukraine and compensate for the losses was on the agenda. But no concrete solution could be found on how to manage this process.
To offset the negative effects of the ongoing war, the management of the said financial aid package, which aims to keep Ukraine standing, will be the responsibility of the International Monetary Fund (IMF). U.S. Secretary of the Treasury Janet Yellen stated that they are pleased to aggregate a larger package than the financial aid package that Ukraine urgently demanded for $15 billion over the next three months. She highlighted that they will not leave Ukraine alone in this process and also mentioned that her European counterparts should be aware of the need to act more generously and swiftly in financial aid in order for Ukraine to survive.
On the G-7 platform, Yellen offered a different solution to her European counterparts with the tariff application instead of banning Russian oil and gas altogether. Thus, they will try to limit Russia's income from fossil fuel exports. Meanwhile, the G-7 agriculture ministers that were meeting this time in Stuttgart discussed rising grain prices due to the war and the threat of global food shortages. The Russia-Ukraine war, which came on top of the global coronavirus pandemic, has dragged the world economy into multiple crises. On one hand, there's the issue of global food security and the regional and global energy security crises, and the global supply chain security crisis is on the other. We run the risk of global inflation, triggered by this multiple-crisis environment. Moreover, the monetary policy preferences of the world's leading central banks add the risk of recession to this picture.
Production and growth
The decision of the U.S. Federal Reserve (Fed) to increase the monetary policy interest rate and the messages that it will continue to increase it, in turn, also raise the recession risk in the leading economies of the world, starting with the U.S. economy. Well, if the way to manage and solve the global food, energy and supply chain security risks to a certain extent is through production and promoting production, doesn’t increasing interest rates due to the inflation risk (that drags the national economies into recession) create another risk for the sustainability of production growth and protecting the workforce?
Wouldn't the leading central banks, with their neoliberal orthodox-based mentality, focused only on the risk of inflation drag economies into recession with interest rate hikes? And wouldn’t this deepen the aforementioned multiple crisis environment? I hope that someone in the global environment will mention that central banks taking the risk of recession may also deepen the food, energy and supply chain crises.