G20 nations to strive for preventing new crisis
Leaders of the world's 20 largest economies yesterday pledged action to reverse a looming global recession and prevent future financial upheaval, but shied away from a coordinated stimulus plan.
The Group of 20 nations, which represent 85 percent of the world economy, issued a five-page communiqué that pledged to "take whatever further actions necessary to stabilise the financial system."
"We are determined to enhance our cooperation and work together to restore global growth and achieve needed reforms in the world's financial systems," the G20 said after the crisis summit in Washington's National Building Museum.
The G20 leaders tasked their finance ministers with drawing up by March 31 a list of financial institutions whose collapse would imperil global capitalism.
That timeframe will go beyond the end of President George W Bush's term and into the administration of Democratic president-elect Barack Obama, who stayed away from the summit.
The lame-duck Bush, who chaired the emergency talks, said he vowed to his fellow leaders that the United States would enjoy a "seamless" transition to Obama's new team.
"I told the leaders this: that president-elect Obama's transition team has been fully briefed on what we intended to do here at this meeting," Bush told reporters after the summit.
"I told them that we will work tirelessly to make sure the transition between my administration and his administration is seamless," he said.
On Obama's behalf, former secretary of state Madeleine Albright and ex-Republican lawmaker Jim Leach held a flurry of contacts with the G20 delegations including with Britain, China, France, Italy and Japan yesterday.
The G20 countries said they would use "fiscal measures to stimulate domestic demand to rapid effect, as appropriate, while maintaining a policy framework conducive to fiscal sustainability."
But while pledging to work together on beefed-up regulation of murky investment tools such as credit default swaps, which lie at the heart of the current crisis, the summit said it was crucial not to go too far.
Reflecting Bush's demands, the G20 said it would strive for new regulation that is "efficient, does not stifle innovation, and encourages expanded trade in financial products and services."
And in line with US warnings against a return to protectionism, the summit grouping all of the major industrialised and emerging players pledged quickly to revive World Trade Organisation talks.
More in line with the thinking of European leaders such as French President Nicolas Sarkozy and German Chancellor Angela Merkel, the G20 members gave the March 31 deadline for concrete proposals on global regulation, oversight and market transparency.
The G20 nations, which include the major industrialised powers as well as emerging giants Brazil, China, India and Russia, have been locked in debate about what caused the crisis, let alone how to escape from it.
While Bush wants a limited tinkering with global financial rules, and no new trade barriers, Sarkozy has declared that "laissez-faire capitalism is over" as banks crippled by toxic mortgage assets are forced to turn to government aid.
The deputy chairman of India's Planning Commission, Montek Singh Ahluwalia, had said late Friday he was "reasonably hopeful" that the leaders would endorse a "coordinated signal for a fiscal stimulus."
But the final communiqué stopped short of that, even as the global economic climate worsened as the leaders convened.
Friday brought news that the 15 eurozone nations were now gripped by recession after two quarters of economic contraction, and US retail sales tumbled a record 2.8 percent in October as worried consumers hunkered down.
The International Monetary Fund and the Financial Stability Forum said Friday they would cooperate to provide an "early-warning system" in an effort to prevent new financial crises.
In the Democratic Party's weekly radio address, Obama said the US economy was already in "recession" and welcomed Bush's convening the summit "because our global economic crisis requires a coordinated global response."
"And yet, as we act in concert with other nations, we must also act immediately here at home to address America's own economic crisis," he said, calling for new stimulus spending following a package adopted by China.
ABSENT OBAMA STILL A PRESENCE IN THE CAPITAL
President-elect Barack Obama is an invisible force as foreign leaders and Congress convene separately in Washington, the economy at centre stage, reports AP.
One sentiment runs below the crosscurrents as a summit of world leaders wrestles with a global crisis this weekend and Congress in the week ahead struggles with rising unemployment and an ailing auto industry: What would Obama do?
Obama is staying away, ensconced in Chicago, unwilling to make any public show of political influence before he is sworn in to office Jan. 20. Indeed, his break with Congress will be complete on Sunday when he officially resigns his Illinois Senate seat.
Obama is being especially cautious about the economic summit, letting President George W. Bush represent the nation. But in the Democratic radio address Saturday, Obama subtly made the point that the summit was only a beginning. "I'm glad President Bush has initiated this process because our global economic crisis requires a coordinated global response," he said.
Obama was more direct with Congress. He urged lawmakers to "pass at least a down-payment on a rescue plan that will create jobs, relieve the squeeze on families, and help get the economy growing again."
"If Congress does not pass an immediate plan that gives the economy the boost it needs, I will make it my first order of business as president," Obama said.
No major economic breakthroughs are expected and, for Obama, the challenges he faces upon becoming president might seem a bit clearer after the foreign leaders and Congress pack up and go home.
"You can imagine the difficulty from the perspective of the participants," said David Lewis, an expert on the presidency at Vanderbilt University. "You don't want to put a lot of effort into doing something when you know that the arrival of a next administration might undo all the work you have done or might undercut an administration that you want to see what they have to offer."
While Obama has laid out an agenda for tackling the economic gloom, the question facing Congress and the international community is whether his prescriptions will be enough.
Obama has proposed a $175 billion economic recovery plan that includes tax cuts, help for states and spending on public works nationwide. But already, economists, labour leaders and some members of Congress are tossing around figures of $300 billion or more. Obama aides are signalling flexibility.
"That was proposed in mid-October," a senior Obama adviser said of the president-elect's plan. "We'll look at it in mid-January and see where the economy is." The adviser spoke on the condition of anonymity because he was not authorized to discuss internal policy thinking publicly.
Congressional leaders are making it clear that any massive recovery plan will have to wait until next year. Senate Majority Leader Harry Reid, in letter to Republican leader Mitch McConnell on Friday, indicated the Senate's work this coming week will be limited to proposals to increase unemployment benefits and to the more complicated task of rescuing Detroit's automakers with a $25 billion emergency loan.
On the global front, Obama has acknowledged the need for a coordinated international response to the crisis. But some foreign allies have their own detailed plans. British Prime Minister Gordon Brown, for instance, has made a case for beefed up role for the International Monetary Fund and has called for global regulators to be watchdogs over the world's largest financial institutions.
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