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G20 to Agree Trebling of IMF Funding to $750bn

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2 Apr 09 | Guardian

Gordon Brown, Barack Obama and other world leaders finalising deal expected to inject huge sum into world economy.

Around $750bn (£512bn) could be made available to help countries pull through the global recession as a result of a decision to treble IMF funding expected to be agreed at the G20 summit in London this afternoon.

Gordon Brown, Barack Obama and other world leaders are finalising a deal that is expected to inject a huge sum into the world economy through a variety of means, with much of the investment coming from countries such as China with vast cash surpluses.

Sources close to the negotiations said that the G20 leaders made “good progress” in their talks this morning and that the summit agreement would show the world coming together in an unprecedented way to fight a global recession.

Although ministers were saying at the weekend that the G20 would agree to double IMF funding from $250bn to $500bn, it is now expected that the final figure will be closer to $750bn.

The G20 leaders will also agree to spend more than $100bn boosting world trade, through measures like export credit guarantees, and they will also use the IMF’s “special drawing rights” mechanism to enable developing countries to strengthen their currency reserves.

The leaders were also said to be close to an agreement on financial regulation, despite warnings from France and Germany yesterday that the draft conclusions on this issue did not go far enough.

Opening the summit at the ExCel centre in the Docklands, east London, this morning, Brown declared there was a “high degree of consensus” on a recovery plan for the economy.

“I believe that the text that has been circulated already reflects a very high degree of consensus and agreement between all of us,” he said.

Stephen Timms, the financial secretary to the Treasury, told reporters that finance ministers had discussed over breakfast the creation of a list of tax havens that refused to comply with international standards on transparency and information exchange – a key Franco-German demand.

He said there was agreement that such countries needed to be named and shamed, but debate continued around the timing of the publication of the list.

Timms said there was a lively debate at the summit, but he was optimistic about the outcome.

“I think we are going to see an agreement today. There is lively discussion of some important topics, but I think we are going to reach an agreement.”

Earlier, Lord Mandelson, the business secretary, told BBC Radio 4’s Today programme that it was wrong to think that the deal was already “sewn up”, because it was not.

He said that Brown had been “very ambitious” in terms of what he wanted to achieve and the results of the summit would have a tangible effect on the lives of ordinary Britons.

“It’s very important for people’s jobs, their livelihoods, their homes, their businesses. It’s about pushing back against the recession and making it as short-lived and painless for as many people as possible,” Mandelson said.

Following Brown’s opening remarks, Douglas Alexander, the international development secretary, said Britain hoped the summit would produce more funding for trade finance to help struggling emerging economies.

“We’ve got to help these countries trade their way out of poverty,” he told Sky News.

George Osborne, the shadow chancellor, said he hoped today’s summit would produce a deal on bankers’ pay but that any agreement would have to be supported by all countries to prevent bias in the global banking system.

“I think there need to be international principles, because obviously you don’t want a system where if the US or London or indeed Germany imposes certain restrictions, that the whole banking community moves off somewhere else in the world,” he told the BBC.

He also said a world trade deal, if it could be agreed, would be a huge stimulus to the global economy.

The normal G20 membership has been expanded so that the leaders of 24 countries are attending the summit, as well as other key international figures such as Ban Ki-moon, the UN secretary-general.

Taro Aso, the Japanese prime minister, plans to use this morning’s discussions to urge his fellow leaders to learn from his country’s painful experience in the “lost decade” of deflation and recession during the 1990s, and implement coordinated “fiscal mobilisation”, together with aggressive plans to clean up toxic assets from banks’ balance sheets.

Kazuo Kodama, Aso’s spokesman, said that, “based on Japan’s experience in the 1990s of addressing the issue of non-performing loans, or toxic assets, there was a situation where both the corporations and household sectors were mired in insolvency”. He warned that dealing with today’s banking crisis could take a very long time. “I’m not saying it will take 10 years, but that’s the risk.” Japan is suffering a deep recession.

Dominique Strauss-Kahn, the managing director of the International Monetary Fund, will echo Aso’s concerns. The IMF, which is likely to see a substantial boost to its resources as a result of today’s summit, believes more must be done to tackle the banking sector crises in many European countries before an economic recovery can be assured.

Yesterday, in a day of breathless diplomacy in London, ranging across arms control and financial capitalism, Brown and Obama emphasised a developing convergence, only for Nicolas Sarkozy, the French president, and Angela Merkel, the German chancellor, to lay down “non-negotiable red lines” on issues such as hedge funds and tax havens, which they insisted had to be met today, and not deferred until future gatherings.

The belligerent tone jarred as it came hours after Brown, standing side by side with Obama in the gilded splendour of the Foreign Office, had declared that the leading countries were hours away from securing a deal to reform the global economy.

Far from rowing back from the aggressive posturing Sarkozy had adopted before flying to London, the French leader resumed the theme, saying this was no time for making “fancy speeches” and dismissing the idea of another summit later in the year. Speaking at a Knightsbridge hotel, he said he trusted Obama, but blamed America. “The crisis didn’t actually spontaneously erupt in Europe, did it?” he said.

The German leader joined in. “This is a historic opportunity afforded us to give capitalism a conscience, because capitalism has lost its conscience and we have to seize this opportunity,” Merkel said.

“This is nothing to do with ego or temper tantrums, this has to do with whether we are up to the challenges ahead or not.

“The day after tomorrow will be too late. The decisions need to be taken now – today and tomorrow.”


Written by Editors

2 April 2009 at 8:19 am

Posted in G-20

Tagged with , ,

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