Inclusive G20 to replace elite G8 permanently
Issued on: Modified:
Signalling the growing importance of emerging economies, US President Barack Obama is set to announce that the G20 will take on a permanent role at the helm of the world economy, trumping the elite G7 and G8 clubs.
REUTERS - Leaders of the Group of 20 rich and developing nations will turn their club into the main body for coordinating economic policy, reflecting the rise of new heavyweights like China, officials said on Thursday.
At a G20 summit to discuss ways of avoiding a repeat of the financial crisis, the leaders also agreed to give more voting power at the International Monetary Fund to countries that have long been under-represented at the global financial watchdog.
The two-day summit convened with the United States pressing its plan to build a more stable global economy in the face of the near meltdown of the financial system in 2008 which plunged the world into recession.
Giving the G20 the main role for coordinating economic policy would make it more important than the G7 and G8 groupings of the industrialized countries which have long dominated the world's economy.
Two years of financial market turmoil, which began in the rich world, have enhanced the economic role of fast-growing countries such as China and India.
"Today, leaders endorsed the G-20 as the premier forum for their international economic cooperation," the White House said in a statement after a summit dinner. "This decision brings to the table the countries needed to build a stronger, more balanced global economy, reform the financial system, and lift the lives of the poorest."
G20 as steering committee
Earlier, British Prime Minister Gordon Brown said leaders would institutionalize the G20, which groups the major rich and developing countries, as the key economic steering committee.
"It's never really happened before. We've had the G8, we've had all these organizations. We've got this one chance to make a huge success of international economic cooperation," he said.
The United States is seeking to enlist the support of countries around the world for a plan to rebalance the world economy and to crack down on banks' risky behavior. U.S. Treasury Secretary Timothy Geithner told reporters there was broad support for this, although G20 members were still hashing out the details.
The White House statement stressed the role of the wide global community in working on economic repairs, saying the agreement by leaders "put the G-20 at the center of their efforts to work together to build a durable recovery while avoiding the financial fragilities that led to the crisis."
U.S. President Barack Obama, hosting his first Group of 20 summit on the same day he chaired the United Nations Security Council, laid out a broad agenda that also included reforming financial regulation and tackling climate change.
One breakthrough was the agreement to shift more IMF voting power to developing economies from the rich world, something the United States had backed strongly.
"We arrived at agreement tonight on reform of (the) IMF to give under-represented countries more of a say in its governance," European Commission President Jose Manuel Barroso told Reuters.
The White House said regulatory overhaul was the top priority for the G20 and Geithner said he expected to leave the two-day meeting with a firm schedule for implementing reform.
Geithner said the challenges facing the global economy "don't respect national borders, and nor can the solutions come from individual countries acting on their own."
"Financial risk and leverage is going to flow where the rules are most lax, but the consequences of failure will be felt globally," he added.
The summit also looked likely to generate an agreement on phasing out fossil fuel subsidies as part of combating global warming, although without fixing a firm timetable.
Financial sector bonuses
Aides were still working on the precise wording for a statement to be issued at the end of the summit on Friday detailing the G20's commitments.
France and Germany wanted curbs on bonuses in the financial sector that they say fostered huge risk-taking and helped cause the turmoil that shoved the world economy into recession.
Japanese Prime Minister Yukio Hatoyama said his country wants to play a part in crafting global rules to rein in "excessive money-making games."
A Canadian official told Reuters the G20 would outline pay principles at this meeting but it was up to each country to enforce its own rules.
The United States, the world's largest economy and the epicenter of the global crisis, wants G20 countries to commit to reducing reliance on U.S. consumers by boosting consumption in exporting countries, such as China, while encouraging debt-laden nations such as the United States to save more.
China has given only qualified support for the idea of policing global imbalances.
There was broad consensus that tougher, coordinated regulation was needed to avoid a repeat of the two-year crisis that cost millions of people their jobs and forced governments to put up trillions of dollars in taxpayer money to prop up a faltering financial system.
Protesters ran through an area about a mile (1.6 km) from the cordoned-off convention center where the G20 was meeting, throwing rocks at police and smashing shop windows as officers in riot gear used pepper gas, pellet-filled "beanbags" and batons to disperse them.
Protests -- usually against some aspect of capitalism -- have often marked summits since trade talks in Seattle in 1999, when demonstrators ransacked the center of the city, targeting businesses seen as symbols of U.S. corporate power.
Daily newsletterReceive essential international news every morningSubscribe