Why in news? The Group of Seven (G7) countries are meeting for the Leaders’ Summit in Italy’s Apulia region between June 13 and 15. Italy had assumed the group’s presidency earlier this year. Prime Minister Narendra Modi is also attending the summit as India has been invited as an Outreach Country. This visit will mark his first foreign trip in his third term as Prime Minister.

During the first day, the participating leaders have agreed to engineer a $50 billion loan to help Ukraine in its fight for survival.

What’s in today’s article?

• Group of Seven (G7)
• Agenda at the 2024 G7 summit
• $50 billion loan to Ukraine

G7

• Origin
  • The origin of G7 lies in the oil shocks of 1973 and the corresponding financial crisis.
  • In order to address the situation after oil shock, the heads of the world's six leading industrial nations decided to hold a meeting in 1975.
  • These six nations were - US, UK, France, Germany (West), Japan and Italy.
  • These countries were joined by Canada in 1976.
• Current Members: US, UK, Canada, France, Germany, Italy and Japan
  • It can be said that the members of this group are the most developed and the advanced economies of the world.
  • The European Union is also represented within the G7.
• Purpose of G7
  • To determine the course of multilateral discourse
  • To shape political responses to global challenges.
  • It provides a platform to discuss and coordinate solutions to major global issues, especially in the areas of trade, security, economics, and climate change.
• Power of G7
  • The G7 is not based on a treaty and has no permanent secretariat or office. The agenda of G7 is set by the presiding nation.
  • It cannot pass any laws because it is made up of separate nations with their own democratic processes. However, decisions taken by G7 have global effects as the member countries are political and economic heavyweights.
• G7 & G8
  • In 1998, Russia was formally inducted in the group, which transformed G7 into G8.
  • However, Russia annexed Crimea in 2014. As a result, it was suspended from the grouping. Hence, the group became G7 again in 2014.

Significance of G7

• Economic Significance
  • G7 nations account for
    • ~ 60% of global net wealth
    • ~ 30% of global gross domestic product, and
    • ~ 10% of the world's population.
• Political Significance
• In 1999, it created the Financial Stability Forum in order to manage the international monetary system
• 47^th summit in June 2021 had focused on the recovery from ongoing COVID-19 pandemic. It promised to distribute 1 billion vaccines to poorer countries.
• Its theme was Global Action to Build Back Better.
• Developmental Significance
  • G-7 provided $300 million in 1997 to help build the containment of the reactor meltdown at Chernobyl.
  • G7 played crucial role in setting up a global fund to fight malaria and Aids in 2002.
  • In October 2020, G7 finance ministers backed an extension of a G20 bilateral debt relief initiative for the world's poorest countries

Criticism of G7

• Declining economic might
  • The relevance of G7 has been questioned in recent years as the combined share of its members in global GDP has fallen.
  • The economic growth of China, India and other emerging economies has led to calls for a more representative global governance structure.
    • In comparison, the G20, which was established in response to the 2008 financial crisis, is seen as a more inclusive forum.
• G7’s ability to achieve cooperation within the group
• Then US President Donald Trump was often at odds with other G7 leaders and at the 2019 summit, he skipped a meeting on climate issues.
• Proposal to reconfigure the group
  • Leaders had proposed a reconfigured G7+, which would include a common euro-zone representative and make space for China, India, and Brazil.

Agenda at the 2024 G7 summit

• The summit aims to coordinate economic policies to stabilise the global economy amidst concerns over inflation and trade tensions.
• It will focus on addressing climate change by discussing strategies to reduce carbon emissions and promote sustainable energy sources.
  • With climate records tumbling recently, collective action is key to addressing such problems.
• In light of the lessons learned from the Covid-19 pandemic, the G7 will prioritise global health initiatives, including pandemic preparedness and vaccine distribution.
• Additionally, the summit will address geopolitical tensions, including relations with China and Russia, and ongoing conflicts with global implications.

$50 billion loan to Ukraine

• During the ongoing G7 summit in Italy, the participating leaders agreed to engineer a $50 billion loan to help Ukraine in its fight for survival.
• Interest earned on profits from Russia’s frozen central bank assets would be used as collateral.
  • The US and its allies immediately froze whatever Russian central bank assets they had access to when Moscow invaded Ukraine in 2022.
  • That basically was money being held in banks outside Russia.
• Most of the money would be in the form of a loan mostly guaranteed by the US government, backed by profits being earned on roughly $260 billion in immobilised Russian assets.
  • The vast majority of that money is held in European Union nations.