Andrew Sparrow, Katherine Baldwin and Heather Stewart, The Guardian
April 2, 2009
‘This is the day that the world came together to fight back against the global recession,’ claims PM as G20 agrees plan for economic recovery
Gordon Brown today claimed that the end of the global recession was now achievable as he unveiled an agreement from the G20 summit that will pump an additional $1tn (Ãƒâ€šÃ‚Â£748bn) into the world economy.
Announcing the conclusions of the London summit, the prime minister also unveiled a surprise move on tax havens, saying that a list of countries that do not comply with anti-secrecy rules would be published today.
“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 reform and with a clear timetable,” Brown told a news conference at the ExCel centre in London’s Docklands, after several days of frantic diplomacy and political posturing.
“Today’s decisions, of course, will not immediately solve the crisis. But we have begun the process by which it will be solved,” Brown added.
Brown said that the world had come together in a way that was unprecedented, and the G20 countries had already committed themselves to spending $5tn by the end of next year on measures to promote growth.
The G20 countries said in their communique that global growth would be more than the 2% already predicted by the IMF for 2010 as a result of the measures taken.
Brown said that the ability of the G20 countries to work together in this way showed that the era when global finance was dominated by the so-called “Washington consensus” was over.
“I think a new world order is emerging with the foundation of a new progressive era of international cooperation,” Brown said.
The announcement on tax havens marks a victory for Nicolas Sarkozy, the French president, and Angela Merkel, the German chancellor. They wanted immediate publication of a list of tax havens, although earlier today British officials suggested that might be delayed.
Under the agreement, the G20 countries proposed:
- New reforms of the global banking system, including institutions such as hedge funds, and other parts of the so-called “shadow banking system” coming under global regulatory control for the first time
- Tighter regulation for credit rating agencies, to prevent conflicts of interest
- A list of tax havens to be published immediately, and sanctions to be deployed against countries that do not comply with anti-secrecy regulations
- Completion of the creation of international colleges of supervisors for national regulators
- An agreement to do whatever is necessary to promote growth in individual countries, allowing for the possibility of the further use of fiscal stimuli in the future
- The injection of an additional $1tn into the global economy through measures including a $500bn increase in the funding available to the IMF, an increase in the availability of money for developing countries through the IMF’s “special drawing rights” to $250bn and a total of $250bn being set aside for trade assistance
- Reform of institutions such as the IMF to allow countries like China to have greater influence. Senior posts at the IMF and the World Bank will open to candidates from the developing world.
- Renewed commitment to the millennium development goals.
- $50bn for the world’s poorest countries.
Speaking after the London Summit, in Docklands, Brown hailed the meeting as, “the day that the world came together to fight against the global recession”.
“We believe that in this global age, our prosperity is indivisible; we believe that global problems require global solutions; we believe that growth must be shared.”
He promised that G20 countries would not “walk by on the other side,” as the world’s poorest suffer the effects of the credit crunch.
Brown said there would be “tough standards and sanctions” against tax havens that did not comply in the future.
The immediate publication of the tax havens list will satisfy a key Franco-German demand, one of the “red lines” Nicolas Sarkozy and Angela Merkel set out at a combative joint press conference yesterday.
Merkel hailed the agreement as “very, very good, almost an historic compromise”.
A triumphant Sarkozy said the agreement far surpassed expectations and claimed victory for the Franco-German camp on financial regulation and tax havens.
“Frankly, to tell you the truth, all of this goes beyond what we could have imagined … I think all of us are delighted with this result,” Sarkozy told a news conference.
The French leader, renowned for his love of the media spotlight, almost managed to upstage Brown when his press conference began several minutes before the prime minister’s final briefing.
Sarkozy said tighter banking regulation was a key demand of France and Germany, and one which they had succeeded in working into the communique.
“This was a priority for Germany and France. This priority has been taken up as one of the priority objectives, the number two, of the heads of state and government.”
The French leader said a new era had begun in the world of global finance: “Since Bretton Woods, the world has been living on a financial model, the Anglo-Saxon model — it’s not my place to criticise it; it has its advantages. Clearly, today, a page has been turned,” he said, referring to the 1944 Bretton Woods conference that created the postwar institutional framework.
Brown said there were no “quick-fixes” to the economic crisis but said the plan agreed should “shorten the recession and save jobs”.
The G20 countries will also beef up the Financial Stability Forum — the Basel-based grouping of central bankers, finance ministries and national regulators — giving it sweeping new powers to oversee the world’s financial markets.
Re-named the Financial Stability Board, the body, which now includes all the G20 countries, as well as the original G8 members, will coordinate action across international borders.
The FSF published a series of tough proposals on bankers’ pay, hedge funds and dealing with cross-border financial crises alongside the G20 communique.
It argues that excessive compensation was “one factor among many” that contributed to the financial crisis that erupted in 2007, and international regulators must scrutinise pay policies at banks — a idea that would have been anathema to the US and the UK before the crunch.
“To date, most boards of directors of financial firms have viewed compensation systems as being largely unrelated to risk management and risk governance. This must change,” the FSF said.
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