G-20 World Leaders Agree Steps to Tackle Financial Crisis

Russia Today, November 16, 2008, 22:44

The leaders of the world's 20 largest economies have pledged to work together to put the global economy back on track. At a one-day summit in Washington they agreed to reform the international monetary system. Finance ministers have been told to submit detailed proposals by the end of March.

The final Declaration, signed by the leaders, pledges to reform global financial institutions such as the World Bank and the International Monetary Fund.

The summit also agreed to help “emerging and developing economies gain access to finance in current difficult financial conditions”.

”We will implement reforms that will strengthen financial markets and regulatory regimes so as to avoid future crises,” the declaration states.

Speaking in Washington, President George Bush said:

“One of the key achievements was to establish certain principles and to take certain actions for adapting our financial systems to the realities of the 21st century.”

Russian President Dmitry Medvedev said he was satisfied with the outcome.

“I'm pleased with the results that we've achieved today in Washington. We've managed to agree upon the declaration that outlines the main principles and guidelines of which the world can base its financial system in the future”.

The world leaders have agreed to meet again before April 20.

Russia calls for creation of ‘economic guru’ commission

Russia has put forward a proposal to set up a team of 20 financial experts to look at ways of rescuing the world's economy.

Russian presidential aide Arkady Dvorkovich outlined Russia’s position:

“To make sure the reform process is most reasonable and effective, President Medvedev has proposed the setting up of an independent commission of financial experts and economic gurus. He thinks the G20 should become the main co-ordinator of the reforms of the world’s financial architecture. And the principles of those reforms should be stipulated in new international agreements.”

A number of bilateral meetings have been held on the sidelines of the summit including one between President Medvedev and German Chancellor Merkel.

Small countries want to be heard

The idea of the G20 summit has been seen differently around the world.  

A rally has been held in the Philippines. Hundreds of protesters marched to the U.S. embassy in Manila on Saturday, carrying large caricature masks of the world leaders. The organisers of the rally called the summit a "jamboree" of rich capitalist leaders.

In Washington protesters also gathered to express their criticism.

A fierce critic of the U.S., Venezuelan President Hugo Chavez has announced plans to hold an alternative summit on the global financial crisis to counter the meeting of world leaders in Washington.

He accused the G20 of ignoring the world's smaller countries. He also expressed doubts that the G20 meeting would manage to come up with measures to tackle the economic "hurricane" that he says the U.S. caused.

World leaders pledge to combat global crisis

By MARTIN CRUTSINGER
AP Economics Writer

Nov 17, 2008, 5:39 AM EST

WASHINGTON (AP) --

With the global economy threatening to slip into a prolonged recession, world leaders have come up with a lengthy action plan they hope will bolster badly shaken investors' confidence.

The plan was produced at a weekend meeting of leaders of the Group of 20, which included the world's wealthiest countries such as the United States, Japan, Germany, Britain and France plus emerging powers such as China, Russia, Brazil and India.

But analysts say it will take more than one meeting, as unprecedented as this gathering was, to turn the tide for a global economy undergoing its worst upheavals in decades.

"This isn't going to have much impact on markets," said Sung Won Sohn, an economist at California State University's Martin Smith School of Business. "They made a good beginning in formulating the financial architecture of the future, but the devil will be in reaching agreement on the details."

C. Fred Bergsten, director of the Peterson Institute for International Economics in Washington, said he would grade the discussions a solid B, a far better mark he said than he has given many of the annual economic summits of the Group of Eight major industrial countries.

"They did a number of good things and came up with some solid principles to guide future discussions although I think it is going to take more than four months to reach major agreements," he said.

The summit received tepid reviews in Asia on Monday, with analysts, investors and media saying the gathering was high on symbolism but short on action.

"To put it harshly, there is little point in trying to figure out ways to prevent a disease once a patient is sick," Credit Suisse Japan analyst Shinichi Ichikawa said in a report released Monday. "The just-concluded summit came up with no specific prescription to alleviate the effects of the most serious international financial crisis."

T.J. Bond, a Merrill Lynch economist in Hong Kong, said some investors were disappointed there was no explicit announcement of coordinated fiscal stimulus measures.

Asian markets were relatively flat despite confirmation Japan had slipped into recession. In Europe, stock markets traded modestly lower.

The G-20 nations agreed to hold another leaders' meeting before April 30, a little more than three months after President-elect Barack Obama takes office.

While the outgoing Bush administration stressed that Obama's team had been fully briefed on the G-20 discussions, analysts suggested that with all the problems facing the U.S. economy at present, Obama may not be eager to wade into the intricate details of international finance as one of his first orders of business.

But German Chancellor Angela Merkel disagreed, saying she was hopeful an Obama administration will participate fully in the G-20 efforts.

"I have not the slightest doubt that we will be able to proceed along the way we set out today," she told reporters at the conclusion of Saturday's meeting. "This is a reasonable approach that the new president will surely support."

Private analysts, however, noted that the G-20 joint statement papered over major disagreements between the countries. The Europeans, led by French President Nicolas Sarkozy, favor more government control over markets, while the U.S. position is that better regulation, not more regulation, is needed.

The emerging developing countries such as China want a greater voice in international financial institutions such as the 185-nation International Monetary Fund, setting up a conflict with Europe, which doesn't want to give up the voting power it has presently.

Even before the current financial crisis struck with ferocity this fall, these issues were the subject of heated debates and there was no sign at the weekend meetings that any nations had given ground on positions they had staked out previously.

Analysts said financial markets may be disappointed that the communique made only broad promises to "take whatever further actions are necessary" to stabilize the banking system and boost economic growth.

Some countries had hoped for numerical goals for increasing government spending by a certain percentage of a country's gross domestic product. The Bush administration resisted such a commitment, mindful that the U.S. rescue actions already taken could push the federal budget deficit above $1 trillion in the current budget year.

However, Obama and Democrats in Congress have talked about the need for a second stimulus package. With the U.S. economy showing signs of a sharp downturn, Congress likely will approve further assistance.

The National Association for Business Economics released a somber new forecast on Monday projecting that the overall U.S. economy, which shrank at an annual rate of 0.3 percent in the July-September period, would contract at a rate of 2.6 percent in the current October-December quarter.

Just a month ago they predicted the economy would post a 0.1 percent GDP growth rate in the fourth quarter.

"Business economists became decidedly more pessimistic on the economic outlook for the next several quarters as a result of the intensification of credit market stresses," said NABE President Chris Varvares, chief economist at Macroeconomic Advisers.

The NABE panel of 50 top private forecasters said they expected the economy would shrink again in the first three months of next year, and they predicted the unemployment rate, currently at a 14-year high of 6.5 percent, would rise to 7.5 percent by the end of 2009.

By wide margins, the panel believed that the recession and severe financial crisis that began in the United States would engulf much of the global economy.

The NABE panel predicted that Britain and much of the rest of Europe, Japan, Canada and Mexico would all suffer recessions in coming months while China and India were expected to see slower growth but avoid outright contractions.

President George W. Bush, who served as host for the G-20 discussions, said it was the seriousness of the current crisis that had convinced him that massive government intervention was warranted.

He said he felt "extraordinary measures" were needed after being told "if you don't take decisive measures then it's conceivable that our country could go into depression greater than the Great Depression."