G20 takes center stage in new economic world order

September 25, 2009

France's President Nicolas Sarkozy (L) and his wife Carla Bruni-Sarkozy (2nd R) stand with U.S. President Barack Obama and first lady Michelle Obama as they arrive at the Phipps Conservatory for an opening reception and working dinner for heads of delegation at the Pittsburgh G20 Summit in Pittsburgh, Pennsylvania, September 24, 2009.     REUTERS/Philippe Wojazer (UNITED STATES POLITICS BUSINESS IMAGES OF THE DAY)   By Emily Kaiser and Darren Ennis
   PITTSBURGH, Sept 25 (Reuters) – The Group of 20 rich and developing countries were set to anoint themselves as caretakers of the global economy on Friday, giving rising stars such as China and India more say in world affairs.
   Heading into their second day of meetings aimed at assuring the economy emerges from a deep global recession with better safeguards against another financial crisis, the G20 pledged to keep emergency economic supports in place until recovery is secured, according to a draft communique obtained by Reuters.
   They also agreed to rein in financial industry excesses that led to the credit crisis, which first erupted in 2007, and to work together to tighten rules on how much capital banks must keep on hand to absorb losses.
   The final version of the communique will be issued when the leaders wind up their meeting on Friday evening.
   Emerging economies looked to be the surprise winners as the leaders sought to finalize agreements on an ambitious agenda that included building a more stable world economy, reforming bank regulations, and tackling climate change.
   U.S. President Barack Obama’s first G20 summit as host tests his ability to juggle domestic and foreign policy.
   As Obama welcomed G20 leaders to a working dinner in Pittsburgh on Thursday, lawmakers in Washington were hashing out terms of a contentious healthcare reform bill that is the cornerstone of his domestic policy agenda.
   After two years of financial turmoil, the global economy now appears to be recovering far faster than many economists predicted, thanks in large part to sharp interest rate reductions, emergency central bank lending programs, and roughly $5 trillion in government stimulus money.
   But with unemployment high and banks still struggling to recoup heavy losses primarily from failing U.S. mortgage loans, the pressure is on the G20 to sustain the economic assistance.
   “Today, leaders endorsed the G-20 as the premier forum for their international economic cooperation,” the White House said in a statement after a summit dinner.
   “This decision brings to the table the countries needed to build a stronger, more balanced global economy, reform the financial system, and lift the lives of the poorest.”
   The move means the G20 supplants the G7 and G8 — institutions dominated by rich Western economies, which will now remain forums for discussing geopolitical issues, diplomats said.
   The G20, which includes the world’s richest nations and fast-growing emerging economies including China, has become the primary venue for world leaders to meet on the financial crisis. Pittsburgh is the third G20 summit in less than a year.
   In another boost for countries such as China, the G20 unexpectedly reached a deal on reshaping the International Monetary Fund to shift more voting power to some developing countries, recognizing their growing economic clout and the vital role they must play in helping the world economy climb out of the the worst recession in generations.
  
   REBALANCING ACT
   U.S. Treasury Secretary Timothy Geithner said on Thursday there was broad support for a U.S.-backed plan to smooth out imbalances between debt-laden countries such as the United States and resource-rich export powerhouses including China.
   That rebalancing act involves the United States saving more and China consuming more — some of which is already happening as a consequence of the global recession.
   U.S. consumers have cut spending as sinking home and stock values took a big chunk out of household wealth, while China spent more than $600 billion to stimulate its economy.
   It was unlikely any countries would consent to G20-imposed rules on how to run their domestic economy.
   However, the draft communique said that G20 countries with either “sustained, significant” surpluses — a description that could fit China — pledged to “strengthen domestic sources of growth.”
   By the same token, countries with big deficits — such as the United States — pledged to undertake policies to support private savings.
   The document also said G20 countries had a “responsibility to the community of nations to assure the overall health of the global economy.”
   China has bristled at suggestions that its $2 trillion in reserves played a role in causing the financial crisis, and said on Thursday the main global economic balance that should worry G20 leaders was the gap between rich and poor nations.
   The draft communique showed leaders endorsed an agreement on phasing out subsidies for fossil fuels, a measure aimed at helping combat global warming, but with no fixed date for the change.
   Many G20 governments, including countries such as China, India and Russia, give tax breaks and direct payments to companies that help them produce coal, oil and other fossil fuels that cause greenhouse gases blamed for global warming. [nN24469250]. (Reporting by Reuters G20 team; Writing by Emily Kaiser; Editing by Frances Kerry)
 ((For further coverage of the G20, go to http://www.reuters.com/news/globalcoverage/G20)) ((For graphics on the G20, click on: http://graphics.thomsonreuters.com/RNGS/SEP/G20A.jpg       http://graphics.thomsonreuters.com/RNGS/SEP/G20B.jpg       http://graphics.thomsonreuters.com/RNGS/SEP/G20C.jpg)) ((emily.kaiser@thomsonreuters.com; +1 202 310 5444; Reuters Messaging: emily.kaiser.reuters.com@reuters.net)) Keywords:
  
Friday, 25 September 2009 06:40:14RTRS [nN25480100] {C}ENDS

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