G-20 Leaders To Give $1 Trillion To IMF, World Bank
LONDON — Anxiously assembled at the most perilous moment for the global economy since the Great Depression, the world's financial powers pledged more than $1 trillion Thursday for emergency loans to contain the contagion. But they rebuffed President Barack Obama's bid for new stimulus spending and made no guarantees of success.
"This was the day the world came together to fight back against global recession," declared British Prime Minister Gordon Brown, the summit host, as he led a choreographed show of unity designed to boost confidence in homes and boardrooms everywhere. "This is just the beginning," added Obama.
No one promised an immediate impact, and all agreed much remained to be done.
Besides promising $1.1 trillion for lending to less-well-off countries _ an effort to erect an economic firewall and prop up remaining markets for bigger nations' exports _ the Group of 20 industrial and developing countries vowed major efforts to clean up banks' tattered balance sheets and get credit flowing again, to shut down global tax havens and to tighten regulation over hedge funds and other financial high-flyers in the U.S. and elsewhere.
But French President Nicolas Sarkozy and German Chancellor Angela Merkel failed to get the powerful "global regulator" they sought with authority across borders, an idea opposed by the United States. The leaders did agree to some expanded international oversight, including cracking down on hedge funds and tax havens.
Collectively, the measures were an attempt to free the clogged pipes of capitalism, so spending, lending, borrowing and manufacturing can expand instead of continuing to retreat.
European and U.S. markets surged ahead of the concluding summit communique, and Wall Street held most of its gains after the results were announced late Thursday.
Unlike previous Western-dominated summits, this gathering included China, India and other economic giants as well as rising powers. Said Brown: "I think the new world order is emerging, and with it the foundations of a new and progressive era of international cooperation."
Obama, in his first major venture into international diplomacy, failed to get U.S. trading partners to spend more money on job-creating stimulus programs, as the U.S. and Britain have done. The proposal was opposed strongly by France and Germany.
"I think we did OK," Obama told reporters afterward. "When I came here, it was with the intention of listening and learning, but also providing American leadership. And I think the document that has been produced as well as concrete actions reflect a range of our priorities."
"In life there are no guarantees; in economics there are no guarantees," he said.
Both Brown and Obama were asked directly, "What happened today to help the world economy," and they both sidestepped the question.
Sarkozy, who at one point had threatened to walk out if he didn't get his way on international regulation, said he was happy with the outcome. Obama "helped me on tax havens," Sarkozy told reporters. "He's a very open man. It was completely in line with what we wanted."
Police were out in force, swarming the east London riverside meeting site Thursday as demonstrators protested world poverty and climate change. A French daredevil scaled a London insurance building to unfurl a banner, entertaining people on the ground. He was led away by police.
It was a high wire act inside the ExCel center, too, where summit partners gathered.
In an effort to offset their inability to agree on the more divisive proposals, the G-20 leaders outlined a raft of policies to rebuild trust in the financial system, including guidelines for new openness.
"The era of banking secrecy is over," said a statement issued by the G-20.
The meeting was a follow-up to one last Nov. 15 in Washington, when the group vowed to resist national protectionism that hampers world trade and to take steps to overhaul the global financial system. The economy is considerably worse now than it was then _ and expectations for breakthroughs had been limited.
Participants sought to trumpet the achievements and not dwell on what they couldn't accomplish. Obama called the summit "a turning point in our pursuit of global economic recovery."
The summit partners renewed vows not to turn inward or pass protectionist policies, even though since the November meeting 17 of the 20 core members, including the United States, have acted to protect domestic industries. In the U.S. those actions have included bailouts for Detroit automakers and a "buy American" provision in the $787 billion stimulus package passed by Congress.
The U.S., which has committed nearly $2 trillion to bailing out failed financial companies and trying to prod consumer spending and job creation, had urged other wealthy countries to do likewise. But European countries, fearful that such deficit spending would rekindle the kind of runaway inflation that marked the 1920s, resisted, suggesting that the stimulus steps they had already taken were sufficient.
Brown, the host, said the communique put out by the group "reflects a very high degree of consensus and agreement."
In the boldest moves of the summit, G-20 participants announced a tripling of loans available to the International Monetary Fund, to $750 billion, a $250 billion expansion in a special IMF fund to help members' foreign exchange reserves, and $250 billion to the IMF to support trade. They also agreed to sell IMF-held gold to poor countries.
The G-20 leaders also said that developing nations _ hard-hit and long complaining of marginalization _ should have a greater say in world economic affairs. Steven Schrage, a former U.S. trade official who is now an international business analyst with the Washington-based Center for Strategic and International Studies, gave the G-20 credit for bolstering the IMF, but said much more needs to be done.
"Given the circumstances, they handled it well. But when you look at this global fire that continued to spread over the last five months, there's still not a clear way forward on a lot of the critical challenges," he said. "There's still no real agreement on stimulus going forward."
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TOM RAUM | April 2, 2009 06:38 PM EST |
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