4 Apr 2009

G20 pledges $US1.1 trillion to fix crisis

6:15 am on 4 April 2009

World leaders at the G20 summit have agreed to spend $US1.1 trillion to strengthen the world economy and toughen up regulations on banks, hedge funds and tax havens.

Summit host and British Prime Minister Gordon Brown said a new world order was being created, adding that leaders have made six pledges to shorten the global recession and restore jobs and growth.

But he also issued a warning after the G20 leaders summit in London that there were no quick-fixes for the world's economy, which has undergone its worst crisis since the 1930s.

Mr Brown said the leaders have agreed to give a $US250 billion boost to international trade and $US750 billion to the International Monetary Fund to help poorer countries.

They have also agreed to try to clamp down on tax havens and bankers' salaries and bonuses. Other measures include injecting about $US250 billion to boost global trade.

The summit brought together the world's biggest economies, developed and emerging, which together account for 85% of world trade and economic output.

The agreement reached on Thursday shifts the balance of global power in significant ways. France and Germany may be emboldened to continue efforts to reform an Anglo-American model of capitalism that they have long resisted.

But more importantly, the summit marks a decisive shift in power to Asia and to the largest emerging economies, in particular China.

The main developing countries at the summit expressed satisfaction with the promise that they will have a greater say in re-shaping the world economic order.

Brazilian president Lula de Silva said rich countries have been humbled by the crisis and accept the emerging nations on equal terms in discussions about the future.

China, India and South Africa were among other developing powers to be satisfied with the agreement to tackle the financial crisis.

Markets worldwide were buoyed in response to what United States President Barack Obama called an historic turning point in the pursuit of world recovery.

However, one fear remains: the poorest countries in the world still feel they will have no real voice and will have to real voice, and will have to rely on the middle and high income nations to protect them.

Crisis far from over

Delegates also recognise the economic crisis is far from over. The G20 leaders were never likely to talk down the summit which they had called to give the world economy a shot in the arm, the BBC reports.

There were also words of warning that this new money and tighter rules were no quick-fix and there was no guarantee that it would work.

Mr Obama noted that it did not address the problem of toxic debts still lurking in the system and no stimulus steps would be effective in countries where sluggish bureaucracy and corruption got in the way.

However, French President Nicolas Sarkozy said the agreement was more than could have been hoped for, while Australian Prime Minister Kevin Rudd hailed the group's resolutions as a way to crack down on cowboys in the financial markets.

New Zealand did not attend the G20 summit, but Finance Minister Bill English said the country would benefit from the economic stimulus package agreed upon.

The extra money to boost global trade would lift the confidence of New Zealand's trading partners, he said.