G20 claims lead role as forum for global economic management

2009-09-26 12:48

THE Group of 20 will become the forum for global economic management, give rising powers such as China more clout, and roll out tougher rules on bank capital by the end of 2012, a draft communique said on Friday.

Ensuring and sustaining economic recovery topped the agenda at the two-day Pittsburgh summit of the world’s richest nations and emerging powers such as China, India and Brazil.

The G20 countries, which account for 90% of the world’s output, vowed to keep emergency economic support in place until a recovery was secured, according to the draft.

US President Barack Obama’s first hosting of a G20 summit tested his ability to juggle domestic and foreign policy.

Disclosure of a second Iranian uranium enrichment plant gave Obama, with the leaders of Britain and France at his side, an opportunity to press for united action against Tehran over its disputed nuclear programme.

The G20 agreed to rein in financial industry excesses that triggered the credit crisis two years ago. Tighter rules on how much capital banks must have in order to absorb losses should be ready by the end of next year and will be phased in during the following two years, the draft said.

The document also tackled the contentious issue of bankers’ pay schemes, blamed for fostering a high-risk corporate culture that led to heavy losses and taxpayer-funded bailouts.

It suggested linking pay to “long-term value creation, not excessive risk­taking”.

The draft did not mention direct caps on pay, as proposed by some European leaders. French officials said the summit had not reached a final accord on executive pay.

The document said the G20 would try to secure a deal next year in the long-running world trade talks.

Similar pledges have been made at a number of international gatherings, but without result so far.

In another boost for countries such as China and India, the G20 unexpectedly moved close to a deal shifting more voting power at the International Monetary Fund to some developing countries, recognising their growing clout.

In return, the draft communique suggested, the G20 should win their commitment to do their part in rebalancing the world economy.

That rebalancing act involves the debt-laden US saving more, and export powerhouse China consuming more.

The draft said G20 countries with “sustained, significant” surpluses – a description that fits China – pledged to “strengthen domestic sources of growth”.

By the same token, countries with big deficits – such as the US – pledged to support private savings.

But it was unlikely any countries would consent to G20-imposed rules on running their domestic economy.

Some of that is already happening, however, due to the recession.

US consumers, long viewed as the world’s “shoppers of last resort”, have cut spending as household wealth has shrunk, while China is spending about $600 billion (about R4.445?trillion) to stimulate its economy and make it less dependent on exports.

The global economy appears to be recovering faster than many economists predicted, largely thanks to furious interest rate cuts, emergency central bank lending and about $5 trillion in government stimulus money.

But with unemployment high and banks still struggling to absorb heavy losses primarily from failing US mortgage loans, the pressure is on the G20 to sustain economic assistance and coordinate how and when the emergency stimulus is phased out.

“We designated the G20 to be the premier forum for our international economic cooperation,” the draft communique said.

The move means the G20 supplants the G7 and G8, institutions dominated by rich Western economies that will now be forums for discussing geopolitical issues, diplomats said.

Leaders endorsed an agreement on phasing out subsidies for fossil fuels to help combat global warming, but without providing a fixed date for the change. – Reuters


Join the conversation!

24.com encourages commentary submitted via MyNews24. Contributions of 200 words or more will be considered for publication.

We reserve editorial discretion to decide what will be published.
Read our comments policy for guidelines on contributions.

24.com publishes all comments posted on articles provided that they adhere to our Comments Policy. Should you wish to report a comment for editorial review, please do so by clicking the 'Report Comment' button to the right of each comment.

Comment on this story
0 comments
Comments have been closed for this article.

Inside News24

 
/News

Book flights

Compare, Book, Fly

Traffic Alerts
There are new stories on the homepage. Click here to see them.
 
English
Afrikaans
isiZulu

Hello 

Create Profile

Creating your profile will enable you to submit photos and stories to get published on News24.


Please provide a username for your profile page:

This username must be unique, cannot be edited and will be used in the URL to your profile page across the entire 24.com network.

Settings

Location Settings

News24 allows you to edit the display of certain components based on a location. If you wish to personalise the page based on your preferences, please select a location for each component and click "Submit" in order for the changes to take affect.




Facebook Sign-In

Hi News addict,

Join the News24 Community to be involved in breaking the news.

Log in with Facebook to comment and personalise news, weather and listings.