Page last updated at 14:10 GMT, Wednesday, 1 April 2009 15:10 UK
G20 leaders seal $1tn global deal



By Hugh Pym
Chief economics correspondent, BBC News

Gordon Brown and Barack Obama speak at their joint press conference
Mr Obama wants a global deal on boosting the economy

Months of preparation and speculation are nearly over.

The sherpas have slogged through the foothills, established base camp and marked out a route to the mountain top.

It is now down to the G20 leaders to make the final push and, ideally, stand together in agreement on the summit.

The route map has been discussed and debated extensively.

It has evolved and changed subtly as the summiteers moved from the first gathering last November, via the Horsham finance ministers' meeting, towards the world leaders' summit at London's Excel conference centre.

So how does the terrain look now?

And how is the likely final agenda looking?

Fiscal stimulus

First, there is the contentious issue of fiscal stimulus, or boosting economic growth.

G20 LONDON SUMMIT
World leaders will meet this week in London to discuss measures to tackle the downturn. See our in-depth guide to the G20 summit.
The G20 members are Argentina, Australia, Brazil, Canada, China, France, Germany, India, Indonesia, Italy, Japan, Mexico, Russia, Saudi Arabia, South Africa, South Korea, Turkey, the United Kingdom, the US and the EU.

The idea that the G20 summit would unveil a major new initiative to kick-start the world economy has evaporated.

In truth, this was never likely to happen anyway but extravagant expectations were allowed to run unchecked.

Germany's Angela Merkel is not the only leader to bridle at the thought of the G20 writing her national budget.

She has pointed out that Germany has already pledged more than many other leading industrialised nations to stimulate the economy.

"This crisis did not come about because we issued too little money but because we created economic growth with too much money and it was not sustainable," Ms Merkel said in an interview with the Financial Times.

The London meeting is likely to highlight fiscal measures already taken by G20 members.

A figure of $2 trillion (£1.4 trillion) has been bandied about.

This is the approximate running total of all the public spending commitments made by governments to boost their economies following the economic slowdown.

The fiscal stimulus section of the final communiqué will focus more on rhetoric than detailed figures.

The benefits of concerted international action will be highlighted, with a claim that this is the largest global stimulus plan ever mounted.

There will be pledges to "do what it takes as long as it takes" to combat global recession.

Protectionism

Workers rest under containers on a cargo vessel at Tianjin port, China
Global trade has tumbled during the global slump

Global trade has come up on the rails as a summit priority.

There will be grave warnings about the dangers of protectionism and a determination to avoid the mistakes of the 1930's when trade barriers and "beggar my neighbour" policies prolonged the depression.

The leaders will note the slump in global trade which has hit developing economies hard.

Policies to support exporters will be emphasized, including insurance schemes. The provision of $100bn of trade finance will be highlighted.

As is often the case with these announcements, it may not be clear how much new money is being put on the table.

And then there is the thorny issue of regulation.

Regulation and reform

President Nicolas Sarkozy and Finance Minister Christine Lagarde
The French delegation want a global regulator

France's President Sarkozy has threatened to walk out if there are no firm measures to rein in banks and hedge funds.

Talk of a split between proponents of the Anglo-Saxon capitalist model and those who support the more interventionist European regulatory model is overblown.

The French President has, in effect, already won that argument, if there ever was one.

Reform of the IMF, as always predicted, will feature strongly in the G20 final communiqué.

Things to watch out for include the price tag for the possible trebling of IMF resources, and the tricky issue of voting rights.

This issue, more perhaps than any other, will underline the shift of power from traditional economic powers, like the US, Japan, the UK and Germany, to the newer players like China and India.



Print Sponsor



FEATURES, VIEWS, ANALYSIS
Has China's housing bubble burst?
How the world's oldest clove tree defied an empire
Why Royal Ballet principal Sergei Polunin quit

BBC navigation

BBC © 2014 The BBC is not responsible for the content of external sites. Read more.

This page is best viewed in an up-to-date web browser with style sheets (CSS) enabled. While you will be able to view the content of this page in your current browser, you will not be able to get the full visual experience. Please consider upgrading your browser software or enabling style sheets (CSS) if you are able to do so.

Americas Africa Europe Middle East South Asia Asia Pacific