ANALYSIS:There is a risk that the inflated rhetoric on the summit may encourage complacency, writes CHRIS GILES.

A DAY after Gordon Brown declared the G20 summit had created a “new world order”, economists and policymakers agreed the outcomes of the London summit were useful but stopped short of endorsing the British prime minister’s vision. It may be too early to tell.

Meeting in Brussels, finance ministers from euro-zone countries rushed to endorse the communique with European Central Bank president Jean Claude Trichet, expressing the hope that the consensus reached “is an important element of confidence”.

A final verdict on the summit’s outcome, however, comes across an age-old problem for economists that the success or failure depends on the time period of comparison, prior expectations and what would have happened had the G20 not agreed to meet in London.

To this there can be no definitive answer. But it is apparent the world economic order was little different on April 3rd compared with April 2nd, since much of the International Monetary Fund’s (IMF) resources, the main achievement of the summit, had already been agreed.

Since more will be needed, says Prof Charles Wyplosz of the Graduate Institute, Geneva, the inflated rhetoric and declarations of a new world order “lessen the pressure on governments to work harder . . . It would be a tragedy that the summit ends up encouraging complacency.”

Compared with six months ago, when the preparations were set in motion, the achievements are greater. Quite a big fiscal stimulus has taken place across the world, monetary policy is looser, protectionism has crept higher but not exploded, the world has converged on tougher banking regulations and international organisations have been given the necessary firepower.

To claim a triumph for the G20 on the basis that such agreements have been struck is too charitable.

Logically it suggests countries would have sat idly by and done nothing as the crisis raged and that their longstanding commitments to give adequate funding to international organisations such as the IMF were not worth a candle six months ago.

The London summit does not mark the end of the world financial crisis or the recession that has resulted, economists note. Morris Goldstein of the Peterson Institute for International Economics graded the summit “a solid B”, saying it was “good but not great”.

The main success economists were praising yesterday was the increase in IMF resources.

None was particularly impressed by Brown’s decision to add up the numbers to a $1,100 billion (€818 billion) total.

Prof Arvind Subramanian, of Johns Hopkins University and a former senior IMF official, argued that the figure was “spin”, with much of the money already in the pipeline.

He also complained that new money for the IMF would help the world’s economy only if countries needed to use it. “The real obfuscation is to compare this $1,000 billion with the fiscal stimulus of $5,000 billion they have already provided – in cricketing terms, one would say that the leaders bowled a googly or, for baseball fans, they threw a knuckleball,” he said.

The same criticism applies to the $250 billion increase in IMF special drawing rights, 60 per cent of which go to industrialised countries that do not need it.

Nevertheless, the increase in IMF resources is welcomed for the additional firepower it gives the fund if the crisis spreads.

The importance of money for trade finance is confusing economists at the World Bank.

Writing on the bank’s crisis blog, Simeon Djankov, a senior economist, admits the money is something “I don’t get”, since he notes there is “no evidence [trade finance] is a real bottleneck to trade”. – Copyright The Financial Times Limited 2009