On September 24-25, twenty world leaders met for the third time this year and reiterated their common goal for global cooperation on the road to recovery from the financial crisis. The G20, which includes developed nations and fast-growing emerging economies such as Brazil, China and India, accounts for about 90% of the world’s economic activity; it is quickly replacing the G8 as the leader of world economic management.
The following important points emerged during the Summit:
- A stronger regulatory framework and macro- economic policy is necessary for a sustainable and balanced growth of the world economy
- Due to the current economic situation, the United States should no longer be viewed as the consumer of last resort; countries such as China need to boost domestic demand and stimulate their own consumer spending
- The G20 pledged to shift 5% in the International Monetary Fund’s (IMF) quota share to emerging economies from over-represented countries such as Saudi Arabia, with the goal to improve the organization’s effectiveness by increasing voting shares and access to IMF loans for developing countries. Also, at least 3% of the World Bank’s shares will shift to these emerging countries.
- Although no cap has been adopted on banking bonuses as requested by many European governments, tighter regulations will be enforced on financial systems, such as enforcing new guidelines for financial pay schemes, in order to limit risk taking and build up new capital.
- Little progress was made on climate change, although President Barack Obama urged the World’s nations to end their subsidies for fossil fuels such as coal and oil, which are the main sources of global warming according to scientists.
The worst of the global financial crisis seems to be over, but a number of issues remain such as rising unemployment and a seemingly decreasing focus on the poor. As the World Bank’s President Zoellick pointed out, “we need a crisis response facility to ensure that quick and effective assistance can be provided to the most vulnerable low-income countries following severe and widespread shocks”.
The G20 Pittsburgh summit indeed represents the beginning of a new era, where voices of new emerging economies could be heard, but the road ahead is still long. Only the future will tell if the G20 countries can find appropriate measures to implement their plans through concrete actions.
Sources: BCC News; Bloomberg; The Chicago Tribune; The Financial Times (www.ft.com/g20); Le Monde; Reuters