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Thursday, 16 December, 1999, 16:19 GMT
What is the G20?
Countries like South Africa want a bigger say
The financial crisis over the last two years revealed serious weaknesses in the world financial system.

The crisis threatened to overwhelm the existing body for managing financial crises, the International Monetary Fund - which nearly ran out of resources in lending $100bn to developing countries.

Private sector panics hurt developing countries
And it highlighted the importance of some of the newer "emerging markets" in the global financial system.

More than $1,300bn in private funds was invested in these countries in the l990s, and it was the withdrawal of much of this lending that precipitated the crisis.

The need to coordinate policies between the world's large industrial countries and these fast-developing countries has led to the launch of a new international economic group designed to link the developed and developing worlds.

Timeline: Creating the G20
June 1997: Thai devaluation precipitates financial crisis
Sept l997: IMF meeting dominated by crisis
August 1998: Russia devalues
Oct 1998: G7 call for world financial reform
Jan 1999: IMF increases resources, Brazil devalues
June 1999: G7 Summit in Cologne
Sept 1999: creation of G20
Dec 1999: first meeting in Berlin
The new group will look at ways of streamlining the global financial system, strengthening the system of regulation in developing countries and finding new private and public resources to prevent further crises.

It is intended to be a "light touch" institution with a small secretariat, run by Canada - in contrast to the unwieldy international bodies that often try to speak for the developing world.

The so-called G20 grouping consists of 19 countries - including all the G8 countries (the rich nations' club), plus emerging giants like India and China - together with the European Union, the International Monetary Fund and the World Bank.

Canada's finance minister, Paul Martin, will chair the G20 for its first two years.

Potential for conflict

Inevitably, the G20 runs the risk of treading on the toes of longer established organisations, and a lot of time will be spent on working out how it will co-exist with bodies like the IMF and the G8.

And there is a good deal of scepticism that now that the immediate crisis is over, there will be the will to work within the new body.

Germany wants to reduce the number of international groupings, to save officials from traipsing around the world. It also wants membership of the G20 kept at that number, to preserve its effectiveness.

The chief economist of Germany's biggest bank, Norbert Walter of Deutsche Bank, has said that it was the rich countries who had the will to "create order" in the world financial system.

Origin in crisis

The new organisation was first proposed by President Bill Clinton at the height of the world economic crisis in October 1998, when financial markets were threatened by the currency collapses in the Far East, Russia, and Brazil.

But it was only formally announced on 25 September 1999 at the annual meeting of the International Monetary Fund, which met after the attempts to stabilise the world financial system had broadly succeeded.

It was brought into being by the G7, the rich countries' club which includes the United States, Japan, Germany, France, Italy, Canada and the UK.

It fulfils the commitment by G7 leaders at their June Summit in Cologne to: "establish an informal mechanism for dialogue among systematically important countries within the framework of the Bretton Woods institutional system (which set up the IMF and World Bank)."

The G20 countries account for 86.7% of the world's GDP and for 65.4% of the total global population.

Its full membership includes 19 countries and the EU, as represented by the country that holds the EU presidency.

The full membership list is:
Argentina, Australia, Brazil, Canada, China, France, Germany, India, Indonesia, Italy, Japan, Korea, Mexico, Russia, Saudi Arabia, South Africa, Turkey, UK, US, the EU presidency.

Top officials from the European Central Bank, the IMF and the World Bank also attend the meetings.

See also:

16 Dec 99 | Business
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