AMERICAN PRESIDENT Barack Obama has described as “historic” the G20 summit agreement to a $1 trillion package of measures in addition to a planned global fiscal stimulus set to reach $5 trillion by the end of next year.
While signalling that their work is far from complete – amid preparations already under way for another G20 summit later this year – Mr Obama said he believed yesterday’s agreement could mark “a turning point” in the pursuit of global economic recovery.
The American president’s words captured the mood among the leaders of the world’s wealthiest countries at the determinedly upbeat conclusion of a summit some had forecast could result in an “Anglo Saxon – European” split over a choice between support for further fiscal stimulus measures and demands for much more stringent regulation of the world’s financial markets.
While the leaders’ concern was to reassure the watching world that confidence, growth, trust and the credit flow would be restored, Mr Obama’s words also provided a potentially powerful boost for British prime minister Gordon Brown, the summit chairman, who had heavily invested his authority and prestige in the summit in face of widespread scepticism as he prepares to lead the Labour Party into a difficult general election year.
With his domestic Conservative opposition at least temporarily discomfited and appearing somewhat marginalised, Mr Brown claimed vindication in a highly impressive performance at a post-summit press conference.
“This is the day that the world came together, to fight back against the global recession,” he declared, “not with words, but a plan for global recovery and reform and with a timetable”.
Hailing what he termed the “new consensus” Mr Brown reported the leaders’ agreement to take whatever action was necessary to restore growth – including their decision to have the IMF monitor fiscal stimulus measures already in place, report on their effectiveness and recommend further action as necessary.
This breakthrough – coupled with a promised crackdown on tax havens and the “rewards for failure” culture in the banking system – prompted German chancellor Angela Merkel to describe yesterday’s outcome as “a very good, almost historic compromise”. Mr Brown – thwarted last week by the Bank of England governor’s warning that the UK cannot afford another significant fiscal expansion – said the stimulus measures already under way around the world would reach five trillion dollars by the end of next year.
The additional $1.1 trillion in additional measures announced yesterday included an additional $500 billion for the IMF; $250 billion in IMF special drawing rights available to all IMF members; a trade finance package worth $250 billion over two years; and at least $100 billion of additional lending by the Multilateral Development Banks.
The leaders delivered key pledges yesterday – to restore confidence, growth, and jobs; repair the financial system to restore lending; strengthen financial regulation to rebuild trust; fund and reform international financial institutions to overcome the current crisis and seek to prevent its recurrence; promote global trade and investment and reject protectionism, to underpin prosperity; and to build an inclusive, green, and sustainable recovery.
The communique also set out principles for reforming the global banking system, including the shadow banking system and hedge funds; new international accounting standards; the regulation of credit rating agencies; and an end to tax havens that refuse to provide information on request.
Mr Brown acknowledged that there were “no quick fixes” while stressing his confidence that the commitments made yesterday would save jobs and shorten the recession.
French president Nicolas Sarkozy said the result of the summit was “more than we could have hoped for”.