LONDON, April 2: G20 leaders agreed to spend their way out of the current global recession with an injection of about $1.1 trillion worldwide, which would take their collective contribution in the fight against the economic meltdown to $5 trillion by the end of next year.
British Prime Minister Gordon Brown, who had been pressing for expanded fiscal stimulus since he started lobbying for the London summit, proudly announced at a crowded press conference the salient features of the consensus agreement, declaring that the ‘Washington Consensus’ had now been replaced by the ‘London Consensus’.
Mr Brown listed six measures agreed at the summit which, he hoped, would boost the world economy, revive the job situation worldwide, tighten global regulations of the world financial system and curb the activities of tax havens.
The six measures are: i) controls on bankers’ pay and bonuses; ii) a “financial stability board” will be set up to work with the IMF to ensure cooperation across borders; (iii) an early warning mechanism to be developed for the financial system; (iv) regulation of hedge funds and credit ratings agencies; (v) cleaning up of banks’ toxic assets; and (vi) increase in aid for the world’s poorest countries.
“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,” Mr Brown said.
Agencies add: Although the United States will have to make the biggest contribution to the initiative, President Barack Obama called the meeting a “turning point” in the battle against the crisis.
The G20 leaders had agreed “an unprecedented set of comprehensive and coordinated actions”, the US president said after the summit.
Stock markets shot up in response to the summit, Wall Street’s Dow Jones Industrial Average rose 3.45 per cent and London’s FTSE 100 index closed up 4.28 per cent.
Even French President Nicolas Sarkozy, who had threatened to walk out of the summit, said the results were “more than we could have hoped for”. German Chancellor Angela Merkel said a “historic compromise” had been made.
Before the summit, the United States and Britain had pushed for bigger stimulus spending while France and Germany had called for the focus to be put on greater regulation of the financial sector.
But the British premier trumpeted an agreement that he said benefited every country.
Gordon Brown said the Organisation for Economic Cooperation and Development would publish a list of “non-compliant” tax havens which face immediate action “and we have agreed tough standards and sanctions for use against those who don’t come into line in the future”. Mr Brown said there would also be new rules on corporate bonuses to discourage bankers who take short-term risks.
The new Financial Stability Bureau will “implement new rules on pay and bonuses on a global level so that there are no more rewards for failure. We want to impose corporate responsibility on every part of the world”. “We have also ordered the IMF to sell billions of dollars of gold reserves to help the world’s poor countries,” Mr Brown added.
He said the IMF and World Bank would undergo major reforms to reflect changes in the power structure of the world economy, which has over the past decade seen the rise of China, India, Brazil, and South Africa as major economic powers.
Mr Brown struck a note of caution, however.“Today’s decisions, of course, will not immediately solve the crisis. But we have begun the process by which it will be solved,” he said.“Today the largest countries of the world have agreed a global plan for recovery and reform. We have resolved that from today we will together manage the process of globalisation.”
DEMONSTRATIONS: Talks on the eve of the London summit were clouded by anti-capitalist protests which turned violent.
Police threw up a ring of steel around the Excel Conference centre in London’s Docklands district --- near the headquarters of many banks blamed for the international crisis.
Small pockets of demonstrators built up around the summit and in the main financial district, the day after thousands laid siege to the Bank of England and attacked a branch of Royal Bank of Scotland.
One man died after collapsing during the protests. Police said bottles and other missiles were hurled at them as they tried to resuscitate the man.
UN Secretary General Ban Ki-moon warned in an article for Britain’s Guardian newspaper that more than economics was at stake in London.
He said that unless decisive action was taken, the crisis could lead to a “growing social unrest, weakened governments and angry public who have lost all faith in their leaders and their own future”. But analysts and aid groups were not so impressed.
Howard Wheeldon, senior strategist at BGC Brokers, lamented that the package might only help prevent a deeper depression.
The G20 statement was “nothing that really softens the blow of recession -- but perhaps some things that stop it moving to depression”, said Wheeldon.
Source: Pakistan Dawn
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