Page last updated at 21:40 GMT, Sunday, 16 November 2008

Leaders welcome G20 action plan

Leaders attend the G20 summit in Washington
Some say the summit is long on promises and short on action

World leaders have welcomed the outcome of the G20 summit that calls for further steps to shore up a global economy on the brink of recession.

The meeting called for a "broad policy response", emphasising the role fiscal policy, such as tax cuts, must play in reviving economic growth.

However, some analysts and campaigners said the outcome was disappointing.

Meanwhile, the head of the IMF has said it is likely to need more funding as requests for financial aid rise.

The G20 promised to make progress before a second summit in April.

The meeting brought together leading industrial powers, such as the US, Japan and Germany, and also emerging market countries such as China, India, Argentina, Brazil and others - representing 85% of the world economy.

This is plain-vanilla stuff they could have agreed on without holding a meeting
Simon Johnson, economist, MIT

China said on Sunday that the meeting, which was attended by President Hu Jintao, was "conducive to the growth of the world economy" and would help reform international financial institutions.

"China hopes that all countries could continue to enhance co-ordination, seek consensus, substantially strengthen the financial regulation and take actions to prevent global economic recession," said foreign ministry spokesman Qin Gang.

Beijing's view had earlier been echoed by the other leaders attending the event.

US President George W Bush said that leaders had agreed to reform global economic structures, but rejected protectionism.

British Prime Minister Gordon Brown said the meeting reached important conclusions about trade, financial stability and economic expansion and Germany's chancellor, Angela Merkel, said she was extraordinarily satisfied with the outcome.

'Plain vanilla'

However, analysts said the meeting was short on specifics but long on good intentions.

The real purpose of this summit was to agree a work programme for reform of the global financial system
Julian Jessop, Capital Economics

"This is plain-vanilla stuff they could have agreed on without holding a meeting," Simon Johnson, an economist at the Massachusetts Institute of Technology and a former chief economist of the International Monetary Fund told the New York Times.

"What's new, except that this is the G20 instead of the G7?"

Carl Weinberg, chief economist at High Frequency Economics, said that markets could be vulnerable after the weekend meeting because there was no clear pledge for co-ordinated tax and interest rate cuts.

"This isn't a strong action statement on addressing the matters at hand," he told Bloomberg News.

While the summit failed to deliver any new stimulus measures to bolster the world economy, Julian Jessop, chief international economist at Capital Economics said the G20 did lay the groundwork for reform.

"Individual governments do not need a green light from the G20 to stimulate their own economies with activist fiscal policies," he said.

"The real purpose of this summit was to agree a work programme for reform of the global financial system. In that respect we would suggest that it has been a success," he added.

Key issues agreed by world leaders at this summit included:

  • reform of international financial institutions such as the World Bank and the International Monetary Fund
  • an agreement by the end of 2008, leading to a successful global free-trade deal
  • improvements to financial market transparency and ensuring complete and accurate disclosure by firms of their financial conditions
  • making sure banks and financial institutions' incentives "prevent excessive risk taking"
  • asking finance ministers to draw-up a list of financial institutions whose collapse would endanger the global economic system

The managing director of the International Monetary Fund, Dominique Strauss-Kahn, told the BBC that its resources were being stretched by the global financial crisis.

He said it was likely to need at least $100bn (68bn) of additional funding over the course of the next six months.

He also called for countries to continue cutting interest rates, wherever possible, to help ease the crisis., adding that he felt the European Central Bank had the room to make another rate cut.

Poor not represented

Oxfam International said that many of the world's poorest and most vulnerable countries were not included in this summit, yet they were the ones likely to suffer most in a global economic downturn.

"More than two billion people were not represented at this summit, and it's critical that their voices and contributions be part of the solution to the current crisis," said Gawain Kripke, spokesperson for Oxfam International.

Gordon Brown and Dmitry Medvedev
The follow-up summit is likely to be in London

The group said that the action plan agreed by the G20, while reaffirming commitments to the Millennium Development Goals, did not include specific measures to ensure this.

Meanwhile, the African Union said that Africa must be consulted over any reform of the world's financial system.

"There is one problem for us, and that is that people tend to take decisions for us, without listening to us, and then impose them on us," said Jean Ping, chairman of the AU commission.

"Africa demands to be heard," he said.


Mr Bush acknowledged that it would be difficult to agree to concrete steps to revive the world economy given the number of countries that attended the summit.

"Once you make the decision to have the G20, then the fundamental question is, with that many nations from six different continents, who all represent different stages of economic development; would it be possible to reach agreements?"

Italy, which takes who takes over the G8's rotating presidency next year, said that G8 group of rich nations remained relevant despite the rise of the G20.

"From January 1, we will have the presidency of the G8, which was not eclipsed by the G20," said Prime Minister Silvio Berlusconi.

"In reality, certain problems must be discussed by countries that have full-fledged democracies as other countries, which are part of the G20, are still on the path to democracy," he said.

The G8 groups the United States, Canada, Japan, Britain, France, Germany, Russia and Italy.

The G20 includes the G8 nations plus the European Union as a bloc, as well as Argentina, Australia, Brazil, China, India, Indonesia, Mexico, Saudi Arabia, South Africa, South Korea and Turkey.

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