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G20 support builds for rebalancing world economy
(Agencies)
Updated: 2009-09-23 10:24 WASHINGTON: Leaders from some of the largest Western powers rallied support Tuesday behind a US plan to build a more balanced global economy and warned against returning to business as usual once recovery takes hold. Canadian Prime Minister Stephen Harper also supported the idea of a rebalanced global economy, to be monitored by the International Monetary Fund, saying world growth can no longer hinge solely on "overextended" US consumers. But French Economy Minister Christine Lagarde said she feared growing signs of economic recovery could undermine commitments to rework and regulate the world financial order.
Brazil, one of the emerging heavyweights of the developing world, spoke out against the US rebalancing proposal, saying the IMF already played a role in monitoring economies. "The way it is, this proposal is obscure and we do not agree with it," Brazil's Finance Minister Guido Mantega told reporters in New York. The G20 club of rich and developing economies holds a two-day leaders summit in Pittsburgh from Thursday and the United States wants to see rebalancing high on the agenda. Also up for discussion are the issues of how to nurture an economic recovery, rein in risk-taking by banks and bankers, and save the planet from global warming. It is the third leaders' meeting since the collapse of investment bank Lehman Brothers a year ago and they are moving now from ways to end the worst global recession since the 1930s to discussing ways to prevent it happening again. The G20 wants to figure out how to build a lasting economic recovery which is less prone to painful boom-bust cycles. US Treasury Secretary Timothy Geithner said on Tuesday the world's biggest economy was at the "beginnings" of a recovery, and the key was to ensure that the recovery was self-sustaining. "To make sure that as we recover from this crisis we are laying the seeds for a more balanced, more sustainable recovery: That is the agenda," Geithner said. BROAD SUPPORT Britain's Brown, currently chairman of the G20, said there was broad backing for US plans for a more balanced global economy though doubts remain against possible reluctance from other major economies. "I have been talking to many countries in Asia, as well as in Europe, and I have been talking to President Obama and others, and I believe that there is support for that framework," he said. "We are looking at how we can put in place for the future the mechanism or path that can lead us to making decisions about better ways of creating growth." A document outlining the US position ahead of the summit said big exporters should consume more while debtors like the United States ought to boost savings. The G20 must also address the sensitive issue of reforming the IMF, to win full support from emerging economies, said Ouseme Mandeng, head of public sector investment advisory at Ashmore Investment Management in London. China and other fast-growing nations are asking for more say at the IMF and other international financing institutions. The United States has backed a plan to shift 5.0 percent of voting power to certain emerging economies from rich nations. However, Europe has yet to fully support that proposal and the emerging economies have pushed for a 7.0 percent shift. BANKING AND CLIMATE CHANGES Curbing huge pay packages for bankers is also high on Europe's to-do list for the summit. At a meeting of G20 finance leaders in London this month there was general agreement on the need to change the risk-taking culture of banks to ensure employees are not rewarded for making risky investments that later collapse. G20 officials also concurred that there should be tighter restrictions on how much capital banks must hold to absorb losses when loans go bad, but offered no specifics. Britain's top financial regulator said the G20's regulation coordination arm, the Financial Stability Board, would ask leaders to back its guidelines on how banks must structure pay policies to avoid big, risky bets by traders. The FSB will state "it is essential that priority use of high profits should be to rebuild the capital needed to support lending, allow official measures to be removed, prepare institutions to meet higher capital requirements, and that bonus and dividend policies should be consistent with this priority," Financial Services Authority Chairman Adair Turner told bankers in London. On climate change, rifts remain between rich and developing economies over how quickly to cut carbon dioxide emissions and who should foot the bill. The G20 is under pressure to show progress before 190 nations gather in Copenhagen in December to try to reach a deal to slow climate change. |
