London, 02/04/2009 (Agence Europe) - Seeking unity and harmony, confidence and determination, the G20 leaders have pledged to do everything necessary to kick-start the economy and prevent another crisis; This resolve takes the form of six commitments set out in the final communiqué, aiming to: - restore confidence, growth and jobs; - repair the financial system to restore lending; - strengthen financial regulation to rebuild trust; - fund and reform the international financial institutions; - promote global trade; - and build green and sustainable recovery. These are major commitments, but embellished with targeted promises sometimes exceeding the initial figures but still lacking a definite timetable. Without foreseeing any new economic recovery measures, the leaders nonetheless decided to mobilise a total of $1 100 billion (1.1 trillion) to face up to the current consequences and to bring the recession to a halt (through various instruments and in favour of several international financial institutions, especially the International Monetary Fund, IMF).
“Today's decisions will not immediately solve the crisis but we have begun the process by which it will be solved”, British Prime Minister Gordon Brown was pleased to say after the meeting. Another summit will be held this year to take stock of how decisions taken in London are developing, he said, saying the results announced today should now become a reality. “If we see that more must be done, we shall act in consequence”, he said before the press, before adding: “A new world order is emerging - that of a new era for cooperation”.
Do what is necessary to restore growth. Playing down the different approaches over the past few days on the desirable level of recovery effort, G20 leaders underlined the historic magnitude of recovery measures decided so far (they will amount to $5 000 billion by the end of next year, will increase activity by 4% and will accelerate transition towards a green economy, the final press release states). They do not explicitly call for additional measures but reaffirm that they are willing to “deliver the scale of sustained effort necessary to restore growth”.
credible exit strategies will be implemented to get back to sustainable public funding and stable prices.
Kick-start world finance. All markets, instruments and large establishments should be covered by regulation or supervision. Systematically important hedge funds will also be affected by increased supervision. Rating agencies will have to register, accounting standards improved, salaries and bonuses to comply with new principles established by the Financial Stability Forum (FSF). To efficiently fight against tax havens, the G20 is envisaging the explicit application of sanctions. The press release explained that the era of banking secrecy is over. It takes note of the fact that the Organisation for Economic Cooperation and Development (OECD) published a list of countries on the same day, whose practices do not comply with information exchange standards. As well as the increasing role of the IMF in the international supervisory mechanism, the G20 decided to transform the FSF into a financial stability board with expanded powers. It will be up to it, together with the IMF, to warn about macro-economic and financial risk and to outline action needed to respond to it.
International financial institutions that are better equipped and more credible. $850bn has been made available to international financial institutions (IFI) to support growth and the economy of developing countries. The IMF will receive a $500bn increase, 250bn from immediate member state funding (the EU has already promised €75bn, Japan 100bn and China is expected to give 40bn, according to Mr Brown) and the rest will come from the New Arrangement to Borrow.
On top of this, the IMF can use its special drawing rights to inject up to $250 billion of money into the world economy. And multilateral development banks 100 billion. At this point, the amounts each is to contribute is yet to be decided.
The needed reform of the institution has not yet been spelt out in detail, but improved representation for emerging economies through increasing their voting rights (based on points in the April 2008 agreement) should be achieved by 2011. The leaders of the institutions should be chosen on merit (and no longer through a sharing of posts between Europeans and Americans) and a timetable for taking the reform further will be discussed at the forthcoming sring meetings of the World Bank and the
IMF, adds the G20 communiqué.
Renewed call to resist protectionism and support world trade. Trade must once again be the engine of growth, said Brown. For this, G20 leaders firstly decided to extend, until the end of 2010, their commitment (agreed in November in Washington) not to raise new trade barriers and to take steps should such measures be taken. Brown said that the WTO assessment of protectionist measures that have been taken in a number of countries over the last few months was certainly rather encouraging, since these restrictions were “not substantial”. To prevent the appearance of new measures of this kind, leaders are banking on naming and shaming. The WTO will be asked to report and, if necessary make public, every quarter, those countries which are not abiding by their commitments.
The world's major economies plan also to boost trade by making available at least $250 billion over two years (the World Bank had called for a $50 billion programme) to try to mitigate the effects of the drop in world trade (estimated by the WTO to be 9% this year). These funds will be made available through export credit and investment agencies and multilateral development banks. The G20 remains determined to conclude the Doha Round negotiations. Leaders will return to this issue shortly, the communiqué says.
Fair and sustainable growth. Restating their commitment to the millennium development goals and to reaching the level of public aid to development promised, the G20 countries want the best use possible made of budgetary spending already agreed to achieve sustainable and green recovery. On climate change, the communiqué makes mention of the need to reach agreement at the Copenhagen conference. (A.B./transl.jl/rh/rt)