World leaders agree action plan for reform, global growth
WASHINGTON (AFP) — World leaders agreed an action plan Saturday to boost flagging global growth and prevent future financial upheaval at a summit here, promising spending plans, a trade deal and reforms.
A final statement from the leaders after one of the biggest international economic gatherings in years pledged responses on a number of fronts, with another meeting scheduled for April to flesh out policies.
Government spending plans are to be used to reverse immediate economic decline, a global trade deal is to be promoted to guard against protectionism, and financial regulation and world financial institutions are to be reformed.
"We are determined to enhance our cooperation and work together to restore global growth and achieve needed reforms in the world's financial systems," the G20 said after the crisis summit here.
The meeting of the Group of 20 nations, which represent 85 percent of the world economy, was convened by outgoing US President George W. Bush to tackle the financial crisis that is seen as the worst since the 1930s.
While weeks ago some had talked expansively of redrawing the financial system in a "Bretton Woods II" overhaul in Washington, the final communique amounted to a commitment to keep working on reforms.
The G20 leaders tasked their finance ministers with drawing up a series of recommendations by March 31 to be brought before a new summit in April, most likely in London.
Six areas will be specifically targeted: regulating those parts of the financial markets that have exacerbated the crisis, boosting transparency and reforming "fat cat" compensation practices.
The ministers, from the industrialized and emerging world, must also evaluate global accounting norms and the financing needs of international financial institutions.
Finally, they must draw up a list of financial institutions whose collapse would imperil the global financial system.
Bush said the leaders had agreed that both the International Monetary Fund and World Bank, the two main international financial institutions created in 1944 in Bretton Woods, should be modernized.
"We should reform the international financial institutions. Again, these institutions have been very important -- the World Bank, IMF -- but they were based on an economic order of 1944," he told a press conference.
British Prime Minister Gordon Brown told reporters "it is absolutely clear that we are trying to build new institutions for the future."
The final communique was also significant in what it did not include. There was no mention of the creation of a global financial market enforcer as demanded by emerging countries but opposed by the US.
"Regulation is first and foremost the responsibility of national regulators who constitute the first line of defense against market instability," the G20 statement stated.
"President Bush was not going to agree to any kind of international enforcement mechanism," commented Diana Furchtgott-Roth, a former chief of staff of Bush's Council of Economic Advisers who is now a senior fellow at the Hudson Institute.
Britain had focused on the need for coordinated stimulus packages from governments around the world to boost flagging growth.
The final agreement said leaders would use "fiscal measures to stimulate domestic demand to rapid effect."
"I believe that you will see in the next few weeks significant further announcements (of tax and spending plans) by a number of countries," Brown said at a press conference.
Russian President Dmitry Medvedev said the summit "went positively."
"The countries which took part in it showed desire and commitment to overcome a crisis which has not yet reached its bottom," he told reporters.
Despite the consensus for the broad ideas of the communique, the summit was severely hamstrung by the absence of the man of the moment: US president-elect Barack Obama.
The Democrat sent former secretary of state Madeleine Albright and ex-Republican lawmaker Jim Leach to meet with members of visiting delegations on his behalf.
Bush, who bid an emphatic "goodbye" at the end of his press conference, said he had told fellow leaders that the United States would enjoy a "seamless" transition to Obama's new team.
While pledging to work together on beefed-up regulation of murky investment tools such as credit default swaps, which lie at the heart of the current crisis, the summit said it was crucial not to go too far.
Again reflecting Bush's demands, the G20 said it would strive for new regulation that is "efficient, does not stifle innovation, and encourages expanded trade in financial products and services."
The summit, which involved the major industrialized powers as well as emerging giants Brazil, China, India and Russia, also concluded with a pledge to revive World Trade Organization talks begun in 2001 on a new global deal.
An attempt to clinch a deal in the Doha Round of talks, intended to boost global commerce by lowering trade barriers, fell apart in July in Geneva.