Top on list: Global oversight of banks, an early warning system, more muscle for IMF, more public spending
By
Bhagyashree Garekar, US Correspondent
-- PHOTO: AGENCE FRANCE-PRESSE
WASHINGTON - UNDER pressure to produce a battle plan to retard a global slowdown, the leaders of the world's top 20 economies are coalescing around a handful of big ideas.
Signs of worsening crisis
European recession
Europe's economy fell into its first recession in 15 years in the third quarter, paving the way for deeper cuts to interest rates and taxes. Gross domestic product in the 15 euro nations shrank 0.2 per cent from the previous three months, when it also contracted 0.2 per cent.
WASHINGTON - BRITISH Prime Minister Gordon Brown said on Saturday that world leaders had agreed to start building new financial institutions at their crisis summit here.
Pointing to a statement issued by G20 leaders, he told reporters: 'It is absolutely clear that we are trying to build new institutions for the future.'
The leaders of the Group of 20 nations, including the world's richest countries and such major developing economies as China, Brazil, India and Russia, issued a joint statement and detailed action plan after their meeting on Saturday pledging to take a variety of steps to combat the current economic crisis and make sure it doesn't happen again.
Tighter patrolling of the world's 30 biggest banks and financial institutions, an early warning system to guard against a financial tsunami and more firepower for the International Monetary Fund (IMF) are some of them.
A fourth ingredient - large amounts of public spending to revive flaccid economies - seemed to be also finding appreciation as presidents, prime ministers and finance ministers made their way through the foggy and clogged streets of Washington for a White House dinner that kicked off an unprecedented Group of 20 leaders' summit. The mood was as gloomy as the weather.
Latest figures showed the world's second-largest economic bloc, the euro zone, had officially slipped into a recession. The United States and Britain are not far behind.
The scenario confirmed expectations that the only source of growth for the world, at least in the first half of next year, will be the developing economies. In a historic first, these countries have front-row seats at a major economic brainstorming session, so far the preserve of the richest nations.
Chinese President Hu Jintao, the leader of the nation with the world's largest pile of cash, commanded attention as he walked in for the closed-door talks.
The spotlight was also on French President Nicolas Sarkozy, who claims credit for urging the US to hold the summit together with British Prime Minister Gordon Brown, credited for nimbly saving the British banking system from keeling over.
The European big idea for a 'college of supervisors' to monitor the biggest financial institutions - a step below the 'super-regulator' desired by Mr Sarkozy and closer to looser cooperation among national regulators favoured by the US and Canada - is finding wide acceptance at the summit which concludes today (4am Singapore time).
The final communique is likely to include this proposal, along with a call for the quick completion of the stalled Doha trade round and the early warning system aimed at detecting future meltdowns by flagging problems such as the overheated housing market and excessive risk-taking in the US that triggered the current crisis.
There is also wide consensus at the summit for a more muscular IMF, with Japanese Prime Minister Taro Aso pledging US$100 billion (S$152 billion) towards its resources and urging Beijing to do the same in return for a bigger say at the world body.
China is demurring and has indicated that its biggest contribution to global health may be marshalling its own growth through the big-bang stimulus package announced in the lead-up to the summit.
The stakes are high and progress is being made, as US President George W. Bush said yesterday. 'Billions of hard-working people are counting on us to strengthen the financial system for the long term,' he reminded the leaders.
But all said, the carefully formulated communique to be released today cannot but have an air of unreality.
US President-elect Barack Obama has deliberately distanced himself from the summit, and his administration is not hidebound by this summit's outcome.
The real deal may be fleshed out only at a follow-up summit forecast for the first quarter of next year.
