G20 seeks to curb market excesses

LONDON // World leaders agreed today on a regulatory blueprint for reining in the excesses that helped cause the worst financial crisis in six decades and pledged more than US$1 trillion (Dh3.67tn) in emergency aid to cushion the economic fallout. The Group of 20 policy makers, meeting in London, called for stricter limits on hedge funds, executive pay, credit-rating companies and risk-taking by banks. They also signed off on plans to commission blacklists of tax havens with a list of offending countries being published last night.

They then boosted the resources of the IMF and offered cash to revive trade to help governments weather the economic and social turmoil. But they sidestepped the question of whether to deliver more stimulus in their own economies. The G20 commitments amount to a transatlantic compromise and an effort to rewrite the rules of capitalism to address an integrated world economy that has outgrown the ability of individual governments to keep it in check. The leaders met as mounting unemployment demands a response even as stocks rose amid signs the global economy may be stabilising.

"Global problems require global solutions," the British prime minister, Gordon Brown, said at a press conference at the close of the summit. "Our prosperity is indivisible." Outlining the conclusions of the summit, Mr Brown announced an additional $500 billion for the IMF, plus $250bn in IMF special drawing rights for fund members and $250bn to boost trade. "This is the day that the world came together, to fight back against the global recession. Not with words but a plan for global recovery and for reform and with a clear timetable," he said.

World markets reacted positively and the index of top European shares was up 5 per cent as Mr Brown spoke. On Wall Street, the Nasdaq was up 4 per cent and the Dow Jones 3.6 per cent. Mr Brown said that while there were "no quick fixes", the decisions meant that "we can shorten the recession and we can save jobs". The French president, Nicolas Sarkozy, said the results were beyond what could have been imagined. Addressing a key demand from France and Germany, Mr Brown said the leaders agreed "there will be an end to tax havens that do not transfer information on request. The banking secrecy of the past must come to an end."

Mr Sarkozy said: "Since Bretton Woods, the world has been living on a financial model, the Anglo-Saxon model - it's not my place to criticise it, it has its advantages - clearly, today, a page has been turned." Concerted measures taken by the G20 economies would raise world output by 4 per cent by the end of next year, a final communique said. "We are undertaking an unprecedented and concerted fiscal expansion, which will save or create millions of jobs that would otherwise have been destroyed, and that will, by the end of next year, amount to $5tn... and accelerate the transition to a green economy," the communique said. "We are committed to deliver the scale of sustained fiscal effort necessary to restore growth."

The statement also said G20 central banks had pledged to maintain expansionary policies as long as necessary and to use all available policy tools. The German chancellor, Angela Merkel, said the financial and economic measures would give the world a "clearer financial market architecture". She said the agreement was "a very, very good, almost historic compromise". It was "a victory for common sense" and an "important step toward order" in markets.

The communique said: "Taken together, these actions will constitute the largest fiscal and monetary stimulus and the most comprehensive support programme for the financial sector in modern times. Acting together strengthens the impact and the exceptional policy actions announced so far must be implemented without delay." The G20 said the IMF would assess the actions taken and would lay out the "global actions required" to meet the group's goal.

The group remains committed to "reaching an ambitious and balanced" conclusion to the Doha trade talks round promising "renewed focus and political attention" to wrapping up a deal. This could boost the global economy by at least $150bn. The G20 will report quarterly on protectionist measures as part of efforts to name and shame those who breach the rules. "The largest countries of the world have agreed on a global plan for economic recovery and reform," Mr Brown said. "For the first time we have a common approach to cleaning up banks around the world and to restructuring of the world financial system. We have maintained our commitment to help the world's poorest.

"This is a collective action of people around the world working at their best." The sweeping communique bridged a gap between the US and European countries led by France and Germany over how far to push changes on regulation to curb the market excesses that led to the crisis. * with agencies