President Hu Attends G20, three UN Summits>>
PITTSBURGH: World leaders took credit Friday for pulling the economy "back from the brink," and promised a new world order of tighter financial regulation and more inclusive global governance to protect the world from future meltdowns.
The leaders of the G20 Summit pose for a group photo at the G20 Summit in Pittsburgh, Pennsylvania, September 25, 2009.
The gathering of the world's 20 top economies cautioned that the recovery remained fragile and agreed to keep stimulus plans, which include government spending and low interest rates, in place in their respective countries.
Turning from the crisis-management of previous summits, the Group of 20 leaders pledged to set up more rigorous financial rules that would cut down on some of the risky behavior and excesses that have been blamed for rocking the global economy. And they vowed better coordination over economic policies.
"Going forward, we cannot tolerate the same old boom-and-bust economy of the past," US President Barack Obama said, speaking as the summit in Pittsburgh ended. "We can't grow complacent. We can't wait for a crisis to cooperate."
Obama had pressed for keeping the stimulus plans just such a course and praised the group's decision.
"Our coordinated stimulus plans played an indispensable role in averting catastrophe. Now we must make sure that when growth returns, jobs do, too," he said at a wrap-up news conference.
Obama said actions taken so far "brought the global economy back from the brink."
Reflecting the shift in the world's balance of power to Asia and Latin America, they made the G20 - which includes such emerging economies as China, Brazil and India - the lead group for tackling international economic issues in the future, eclipsing the older, Western-dominated Group of Eight.
"The old system of international economic cooperation is over. The new system, as of today, has begun," said British Prime Minister Gordon Brown.
"It's clear that the G8 without the G20, without the remaining 12 countries, is today incapable of deciding all the tasks before the world economy," Russian President Dmitry Medvedev said.
They agreed to require members to subject their economic policies to the scrutiny of a peer review process that would determine whether they were "collectively consistent" with sustainable global growth. They promised tighter and more coordinated financial regulation.
However, the G20 pledges lacked on details, and did not say, for instance, how the proposed peer review process would be enforced.
In the first international summit hosted by Obama, the G20 turned on greedy bankers, agreeing on measure to curbs their bonuses in a bid to encourage more responsible behavior.
According to the new agreement, bankers would only get part of their bonuses upfront, while the rest would be dependent on the long-term financial performance of the firm.
"There was unanimity around the table that the errors of the past won't happen again," French President Nicolas Sarkozy said. "I am very satisfied by what we decided."
EU leaders had called for links between bankers' pay and the companies' long-term performance and have sought to end bonuses. Sarkozy in particular has lobbied for better financial regulation, warning that the world risked another speculative bubble "which when it bursts would put our economies on the edge of the abyss."
Leaders also agreed to make banks increase their capital buffers when the economy has recovered enough to allow them to put money aside to cushion against future downturns - a measure pushed by the United States. Europeans worried about being at a disadvantage won a key concession by ensuring that differences in accounting standards and the extent of the bank's risky behaviors be considered when determining the size of the buffer.
And, repeating pledges from G20 summits in November and April, when financial panic was rampant, they vowed anew to "reject protectionism in all its forms."
They failed to mention that previous pledges to avoid protectionism had been ignored by nearly all 20 members.
Summit leaders also agreed to a bid proposed by Obama to reduce government subsidies for fossil fuels such as oil and coal linked to global warming. If fully implemented, the move would phase out $300 billion in global subsidies, the US president said.
"All nations have a responsibility to face this challenge," Obama said.
The final statement also said voting powers in the IMF "should reflect the relative weights of its members in the world economy, which have changed substantially in view of the strong growth in dynamic emerging market and developing countries."
Now, developed industrialized nations wield about 57 percent of the voting rights in the IMF to about 43 percent for developing nations. The G20 leaders called for shifting shares from developed powers to emerging ones by at least 5 percentage points. They called for a similar shift at the World Bank.
European countries, particularly France and Britain, have been resisting such changes, which would diminish their role.
The streets of Pittsburgh were generally calm, a day after police and protesters clashed. A few thousand demonstrators pledging nonviolence banged drums, danced and held signs advocating assorted causes. On Thursday, a march without a permit and other demonstrations ended with nearly 70 arrests.
South Korean President Myung-bak said his country will chair the G20 next year and will host the next summit in November 2010.