| Summit seals historic deal | ||||||
LONDON: After a day of frenzied activity and almost five hours of hard negotiations, leaders of the world's largest economies yesterday reached an agreement to tackle the global economic crisis with financial measures worth $1 trillion. This is on top of the largest bundle of macroeconomic stimulus packages the world has ever seen — with a staggering $5 trillion being injected into economies worldwide by governments through the end of next year. "This is the day that the world came together to fight back against the global recession, not with words, but with a plan for global recovery and for reform and with a clear timetable for its delivery," declared a buoyant British Prime Minister Gordon Brown, the summit host, in his closing statement. "Our progress is indivisible. Global problems require global solutions ... We want to restore global trade, jobs and confidence in the financial system. The old Washington consensus is over ... A new world order is emerging." The $1 trillion will go to the International Monetary Fund (IMF), perhaps the biggest beneficiary of the G-20 talks. This includes the $250 billion already pledged plus a $500 billion of new resources to help troubled economies, especially in the emerging countries that have been impacted by the global financial crisis through no fault of their own. It also includes a further $250 billion in so-called Special Drawing Rights (SDR), the IMF's currency that the world's poorest countries can call on to help bail out their economies. The IMF will also explore the possibility of selling some of its gold reserves to provide extra funding for poor countries. Thus far the main contributors to the $1 trillion pledged include $100 billion from Japan; $100 billion from the EU; and $40 billion from China. However, there will also be a new agreement for $500 billion that will be announced over the next few weeks. Brown agreed that China, Saudi Arabia, India and other countries should receive more equitable representation at the IMF. The Chinese want a quid pro quo on the basis of more say for more money for contributing to the IMF coffers. Beijing has a strong case in this respect. China's current voting rights at the IMF, for instance, are the same as Switzerland's, whose economy and contributions are miniscule compared with Beijing's. Similarly, Beijing expressed the need for a new international reserve currency to mitigate the decline in the value of the US dollar and the euro. However, China did not present detailed proposals for such a move. The G-20 leaders did not rule out such a move but stressed that they would look at any proposal that is presented in detail. The Chinese do not merely want the end to the "Washington Consensus" but also the "Washington Currency". The G-20 leaders agreed on several core pledges and will meet again later this year at a venue to be announced over the next few days to take stock of the progress made in implementing the measures agreed at this London summit and agree any additional measures that may be further needed to ensure stability and growth in the global financial and economic systems. The leaders committed to a series of reforms and pledges, including a major overhaul in the way the global banking system and credit ratings agencies are regulated and a crackdown on tax havens and sanctions on countries that do not comply with eliminating them. The IMF will be given more authority to ensure cooperation across borders and act as an early warning system. Executive bonuses to bankers will be leashed so as to avoid guaranteed bonuses even for overall poor performance. The leaders have also committed to collaborating on cleaning up banks' toxic assets and increasing lending to families and businesses. Provisions to help promote international trade through the World Bank have also been included, as well as a pledge to meet the UN's Millennium Development Goals and work toward a greener global economy. Any talk of divisions between the US and UK on the one hand and Germany and France on the other hand soon dissipated with German Chancellor Angela Merkel describing the agreement as "a very, very good, almost historic compromise that will give the world a clearer financial market architecture." Brown said there was "no quick fix" to the world economy but there was a commitment to do whatever was necessary. "Today's developments," he stressed, "will not solve the world's economic problems immediately. But, we have begun the process by which they will be solved." French President Nicolas Sarkozy said that the conclusions of the summit were "more than we could have hoped for" from the crunch talks. "The G-20 countries have decided on a profound reform of the international financial architecture, which has not been done to such an extent since the Bretton Woods accords in 1945," he said. The agreement represented "a commitment by heads of state and government to strengthen regulation and supervision of financial activities. That was a priority for Germany and France." Australian Prime Minister Kevin Rudd hailed the summit decision to launch a crackdown on "cowboys" operating in unregulated financial markets. Rudd said the leaders had shown "an overwhelming drive toward achieving a real outcome with real commitments and real timelines in order to provide a pathway to global economic recovery." He said the summit had disproved the cynics who had claimed that the Group of 20 was riven by divisions and would find it impossible to reach agreement. "Today's agreement begins to crack down on the sort of cowboys in global financial markets that have brought global markets undone, with real impacts for jobs everywhere," he said. UN Secretary-General Ban Ki-moon welcomed the $1 trillion commitment but said it was vital that the poorest countries benefit. In a statement released in New York, Ban said he was pleased by the package, which will be mainly channeled through the IMF. "But it will be critical that the share of this going to the poorer countries is delivered," he said. EU President Jose Manuel Barroso said: "It is a historic moment, a defining moment for our global response to the crisis...We took the right decisions." Yvo de Boer, head of UN Climate Change Secretariat said: "This is a good example of the major economies of the world coming together and developing a common understanding." Mushtak Parker | Arab News | ||||||
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03 April, 2009
Summit seals historic deal
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