Most global markets rose on Monday as investors were encouraged by the Group of 20 rich and developing nations’ pledge to reduce budget deficits.

“Nothing earth-shattering from the G-20 meeting, but policy makers have done a rather elegant job at containing the underlying conflict on growth versus fiscal consolidation that had pitted in particular Germany against the United States, but also split the euro zone down the middle,” said Unicredit chief economist Marco Annunziata.

Ben Potter, resdearch analyst at IG Markets, called the progress on global deficit reduction “encouraging.”

European markets broke a four-day run of losses. Britain’s FTSE 100 stock index was up 0.4 percent while Germany’s DAX was 1.4 percent higher. France’s CAC-40 was up 1.6 percent.

In New York, Wall Street investors started the week slightly downbeat after a report signaled that consumers remained cautious about spending.

The modest day came ahead of a big week of US economic data, including the government’s monthly jobs report on Friday. Investors will want to see private sector job growth because any signs of hiring add confidence that the economy is improving.

In Asia, Hong Kong’s Hang Seng index climbed 0.2 percent and benchmarks in South Korea, Taiwan, India and Singapore also posted mild gains. Elsewhere, Japan’s Nikkei 225 stock average fell 0.3 percent as a strong yen weakened exporters.

Australia’s S&P/ASX 200 lost 0.7 percent and the Shanghai Composite index shed 0.7.

The dollar gained to 89.42 yen from 89.33 late Friday. The euro fell to $1.2326 from $1.2371. Benchmark crude for August delivery was down 27 cents at $78.58 a barrel on the Nymex.

AP, JG

Wary of slamming on the stimulus brakes too quickly but shaken by the European debt crisis, world leaders pledged Sunday to reduce government deficits in richer countries in half by 2013, with wiggle room to meet the goal.

Leaders of 20 major industrial and developing countries generally sided with cutting spending and raising taxes, despite warnings from President Barack Obama that too much austerity too quickly could choke off the global recovery.

“Serious challenges remain,” they cautioned in a closing statement. “While growth is returning, the recovery is uneven and fragile, unemployment in many countries remains at unacceptable levels, and the social impact of the crisis is still widely felt,” according to the document from the Group of 20 major industrial and developing nations.

Obama told a news conference he was satisfied with the outcome, saying he recognized that countries had to proceed at their own pace in either emphasizing growth or budget austerity.

“We can’t all rush to the exits at the same time,” Obama said after three days of economic summitry.

Summit participants navigated a careful course between Obama’s emphasis on growth and fellow leaders such as German Chancellor Angela Merkel who advocated spending cuts and even tax increases.

“Advanced economies have committed to fiscal plans that will at least halve deficits by 2013 and stabilize or reduce government debt-to-GDP ratios by 2016,” according to the statement. The gross domestic product, or GDP, measures the value of all goods and services, and is considered the best gauge of economic health.

At the same time, the statement called for following through on “existing stimulus plans,” heeding Obama’s concerns.

Japan was given an exemption from meeting the debt targets because of years of a stagnant economy, and the fact that its huge debt is largely owned by Japanese and not overseas investors.

Canadian Prime Minister Stephen Harper, the summit host, told reporters that deficit reduction “is not an end in itself” and that there is “an ongoing role for stimulus in the short term.”

As the summit wrapped up, conditions on the streets of Canada’s biggest city remained tense.

Police, responding more aggressively than the day before, raided a university campus and rounded up protesters in an effort to quell further violence after youths rampaged through the city the night before, smashing windows and torching police cruisers. Police said they arrested more than 600 demonstrators.

Harper blamed “thugs” for the violence and suggested the destruction and fires on the streets justified the $900 million that Canada spent for summit security.

World leaders also took note of the devastating oil spill in the Gulf of Mexico in their statement, which recognized “the need to share best practices to protect the marine environment, prevent accidents … and deal with their consequences.”

The April 20 explosion on the BP-leased Deepwater Horizon rig unleashed the worst offshore oil spill in U.S. history. BP is London-based and the disaster has contributed to strains between the U.S. and Britain.

Britain’s new conservative prime minister, David Cameron, told reporters BP was working hard to cap the well, “clean up the mess” and compensate victims. At the same time, “what we all want is for this important company to be strong and stable for the future,” he said.

The G-20 statement limits the deficit-reduction goal to the most industrialized nations and offers governments flexibility on when to start balancing their books.

French President Nicolas Sarkozy pointed out that “France has made even more stringent promises to its European partners on deficit-cutting.”

Asked if summits were necessary, Sarkozy admitted that they can be exhausting. “We end these summits empty, tired, but it’s our duty to participate,” he said.

European countries, in particular, have been rattled by the near-default of Greece on its government debt.

The document doesn’t endorse a bank tax advocated by Europe and the U.S. to set up a fund to pay for future bailouts. Canada, Australia and Japan, whose banks did not fail in the crisis, oppose the levy.

Instead, it says all countries should make sure taxpayers are not stuck with the bill when banks fail, and leaves it up to individual countries to decide how they want to do that.

Canada’s Harper urged leaders to “send a clear message that as our stimulus plans expire, we will focus on getting our fiscal houses in order.” He said global economies needed to walk a “tightrope” between deficit spending this year, ensuring the fragile recovery continues and then switching to deficit reduction programs.

The G-20 includes the world’s major industrial countries – the United States, Japan, Germany, France, Britain, Canada, Italy and Russia – plus major developing nations such as China, India and Brazil.

Some countries will find it more difficult than others to meet the new deficit targets.

The United States ran a record deficit of $1.42 trillion last year, or 10 percent of its GDP. Private economists expect the deficit will decline only slightly to $1.3 trillion this year, which would amount to 9 percent of GDP.

Obama’s budget plan from February would cut the deficit in half by 2012, as a percentage of GDP. He’s also named a commission to examine how to trim the deficit further, to 3 percent of GDP – a level economists generally view as sustainable.

Republicans have suggested it is unlikely that Obama will be able to meet his own deficit-reduction targets and say the White House has yet to put forward a credible plan. And critics complain that the deficit commission Obama set lacks the power to make Congress consider its recommendations.

Yet, the U.S. stands a generally good chance of meeting the targets, assuming a strengthening economy between now and then.

Britain is in worse shape. Its deficit this year is over 10 percent of GDP in 2010.

“For European countries with high budget deficits, especially for the U.K. with the highest budget deficit in the G-20, we have got to make our contribution to that sustainable growth by showing the world that we can live within our means,” said British Treasury chief George Osborne. In a BBC interview, Osborne said that means stiff cuts in government spending.

Britain last week put forward a tough emergency budget, raising taxes and cutting spending by levels not seen since World War II.

On the other end of the spectrum, Canada’s federal budget deficit will be less than 3 percent of GDP this year. Ottawa’s plan aims to balance the budget by 2014-15.

As he opened the final session, Harper boasted that Toronto was “home of the most solid financial sector in the world.” Its banking system was barely affected by the financial meltdown of 2008.

The deficit targets that the G-20 countries adopted had been outlined by Harper in a letter he sent to fellow leaders this month. But there were disagreements over them right through a dinner on Saturday night.

Treasury Secretary Timothy Geithner met Sunday for the first time with Japanese Finance Minister Yoshihiko Noda and stressed the importance of the G-20′s call for strengthening rules for banks to set aside money as cushions against potential losses, according to a Treasury Department official.

Obama had urged the G-20 countries to avoid the costly mistake made during the 1930s, when countries reduced government support too quickly and ended up prolonging the Great Depression.

The joint statement made only a passing reference to the need for “greater exchange rate flexibility” and made no specific mention of China’s recent announcement that it would allow its exchange rate to rise against the dollar.

That was a victory for the Asian superpower, which has repeatedly said it did not want to be lectured by other powers on exchange rates.

However, Obama, at his news conference, said: “The United States welcomes China’s decision to allow its currency to appreciate in response to market forces. We will be watching very closely in the months ahead.”

The Associated Press, Toronto | Mon, 06/28/2010 9:01 AM | Headline

June 19, 2010

Washington (CNN) — President Barack Obama welcomed Saturday’s news that China’s central bank will allow its national currency to float ahead of the G-20 summit in Toronto, Canada, next week.

In a statement issued Saturday, Obama praised China’s decision to increase the flexibility of its exchange rate, which officials hope will help balance China’s trade deficit with the United States and Europe.

“China’s decision to increase the flexibility … is a constructive step that can help safeguard the recovery and contribute to a more balanced global economy,” the president said in the statement.

“I look forward to discussing these and other issues at the G-20 Summit in Toronto next weekend,” he said.

Will currency move help U.S.-China relations?

China’s official Xinhua news agency said The People’s Bank of China — China’s central bank — announced Saturday it would push further its rate reform to make the the yuan, also known as the renminbi, more flexible. The move could appease international criticism against China’s weak exchange rate, which has created trade imbalances between Western nations and China.

The decision was made in view of the recent economic situation and financial market developments at home and abroad, and the balance of payments (BOP) situation in China,” Xinhua quoted the Central Bank’s spokesperson.

“The stability of the RMB (renminbi) exchange rate has played an important role in mitigating the crisis’ impact, contributing significantly to Asian and global recovery, and demonstrating China’s efforts in promoting global rebalancing,” he said.

The International Monetary Fund’s managing director, Dominique Strauss-Kahn, released a statement on China’s move, which he described as a “welcome development.”

“A stronger renminbi is in line with findings of the G-20 Mutual Assessment Process, to be presented in Toronto next week, and will help increase Chinese household income and provide the incentives necessary to reorient investment toward industries that serve the Chinese consumer,” he said.

China’s move comes ahead of the Group of 20 and the Group of 8 meetings in Canada’s Province of Ontario scheduled next week, with finance ministers and central bank governors of major trading powers will discuss trade issues and the world financial crisis.

Representatives of several industrialized nations including India, Brazil, the United States and European countries have previously asked China to allow its currency to float.

Source: CNN.Com

Source: The Jakarta Post

Jonathan Wootliff |  Tue, 09/29/2009 1:15 PM  |  Environment

It appears that President Susilo Bambang Yudhoyono understands what is the real crisis facing our planet.

With the continuing popular obsession with global economic woes, most of the leaders attending last week’s G20 summit in Pittsburgh came prepared with more of the same, worn-out rhetoric about the need to fortify the world’s financial systems.

Buoyed up from his recent election victory, a newly emboldened SBY joined fellow government heads attended the meeting in the US former steel town playing a refreshingly different tune.

He presented a case study to his counterparts on Indonesia’s innovative strategy to wean this nation off addictive fuel subsidies.

For as worrying as it may be, he clearly recognizes that the growing threat of climate change will make the current financial troubles look like a fly on an elephant’s back.

This President knows that the untamed escalation in the use of fossil fuels is creating the greenhouse gas emissions that will ultimately cause untold damage to the planet – which all of the world’s treasuries will be unable to fix.

Thankfully, his US counterpart, Barack Obama, shares his concern, which is why he was invited to explain his fuel subsidy reduction policy to the summit, in the hope that other nations would follow suit.

After years of increasing fuel subsidies, Indonesia has instituted a cash transfer system that now enables the government to direct cash payments to more than 19 million households while reducing across-the-board support.

This action has improved the national balance sheet while enhancing the economic condition of the poorest 40 percent of the country’s population, and heralding a whole new approach to our unbridled dependence of planet-heating fossil fuels.

It was SBY’s impassioned public plea and skillful backroom diplomacy at the UN climate change summit in Bali in December 2007 that significantly helped to ensure its successful outcome. Arguably, without the President’s eleventh hour intervention, efforts to allay the prospect of irreversible global warming would have been severely derailed.

Following desperate last minute efforts to avert failure, it was Indonesia that emerged as a true hero. The country’s reputation on the world stage was appreciably enhanced.

Now, as the G8 is replaced by the G20 as the new beacon for global leadership, it is heartening to see Indonesia playing such an innovative and influential role.

Throughout the years of the Bush administration, too many shortsighted Western commentators unfairly blamed the developing nations for hampering progress in instigating effective intergovernmental policies for tackling climate change.

In subsequently rejecting Kyoto, the original climate change treaty hammered out in Japan 12 years ago, the Bush administration took the parochial position that until and unless poorer countries were prepared to cap their greenhouse gas emissions, that it was unfair to expect the US – the world’s single largest polluter – to do so.

The emergence of the G20 has now given seats at the top table to the very nations previously derided by the last US administration for not playing ball on climate change policy.

It is pure political poetry that one such nation has so immediately played such a pivotal role in shaping new thinking on this critical global challenge.

With a key outcome of the Pittsburgh summit being a unanimous agreement of the 20 nations to phase out fossil fuel subsidies, history will again surely show Indonesia was a true hero in the word’s struggle to prevent adverse climate change.

There’s no doubt that the elimination of subsidies is only one small step along a long road to solving the problem. But it is an important stride in the right direction. And the timing is perfect, as governments now turn their attention to the impending climate change talks in Copenhagen in December when it is hoped that a successor to the Kyoto treaty will be agreed.

Planet Earth is sick. Rising sea levels, failing crops, debilitating floods and alarming temperature changes are just some of the many worrying symptoms which will cost far more to cure than the slump on Wall Street.

Climate change is the real crisis facing the world. It’s time for our world leaders to wake up to this harsh reality.

As one of the largest emitters of greenhouse gas emissions, it is gratifying that Indonesia should be taking a leadership stance in helping to avert catastrophe.

We cannot allow our politicians to procrastinate on this issue. Scientists are clearly showing us that time is running out.

SBY should be applauded for his international leadership. He has shown his mettle as a true crisis manager.

As we march towards the Copenhagen summit, with its newfound international reputation, I hope we will see Indonesia continuing to play an influential and innovative role in mobilizing world governments in bringing Planet Earth back to good health.

Jonathan Wootliff is an independent sustainable development consultant specializing in the building of productive relationships between companies and NGOs. He can be contacted at jonathan@wootliff.com.

Source: Brookings Institute

President Obama’s announcement today that the G-20 Summit will “permanently replace” the G-7 is a historic event. The G-20 communique today reportedly will state: “We designate the G-20 to be the premier forum for our international economic cooperation.

What this means is that the G-7 finance minister forum will be replaced by the G-20 leaders summit. The next G-20 summits will be in Korea as chair of the G20 next spring and Canada as chair of the G-8 next June. The G-8 Summit will still meet on international security and foreign policy issues but its status as the global steering committee for global issues will be superseded now by the G-20. International economic cooperation was the founding keystone of the G-7 Summits in 1975 by Helmut Schmidt and Valery Giscard D’Estaing, heads of state who had both been finance ministers.

The ascendence of the G20 is a major turning point in the form, style and function of global leadership, shifting the focus from the G7 which represents the West and a minority of less than one billion people to the G20 which includes ten non-Western, emerging nations which represent the global majority.

The president obviously consulted all the G20 leaders before announcing this today, not least because French president, Nicolas Sarkozy only a few weeks ago announced that when it would be his turn to host the G-8 in 2011, he would convene a permanent forum at G-14, a G-8 plus 5 plus 1. That would have excluded the three Muslim nations in the G-20—Indonesia, Turkey and Saudi Arabia— as well as removed Australia and Korea, all valuable, weighty contributors to meeting global challenges.

The president is acting on his own strong perception that no nation can address global challenges alone and implicitly is recognizing that the West can not presume dominance in a world of rising non-Western powers like China, India, and Brazil. These rising super-powers themselves want other non-Western nations at the global table, not just be included informally, as they have been for some time, in the G-7/8 summits.

This is a symbolic act of inclusion of immense importance to international politics. It establishes a new framework for international economic cooperation, multilateral decision making, and global coordination. As a result, it is a step toward greater effectiveness in global leadership by filling the void created by the pretense of the G-7/8 being a global forum when it was really only a forum of Western nations.

There is tremendous significance to the history being made today that this decision does not enlarge the G-7 but replaces it. No one calls the G20, the G8 plus 12 ! The G-20 Summit rests on a history of ten years of interactions by finance ministers, central bank governors and deputies that has occurred since the Asia financial crisis in 1998. This dialogue already has grown to include foreign ministries and other senior officials from G-20 countries who will now engage with each other to take concerted and coordinated actions to move the world forward on the crucial global agenda.

The new global leadership manifested by the G-20 is a fresh start for addressing the challenges of the 21^st century by a group of countries that are broadly representative of the world, which can devise ways to include still more diverse country perspectives in its deliberations, and which as a result can be effective in guiding and steering the international community toward cooperative outcomes which are in the interest of all people.

Source: MSN.Com

Newly crowned the world’s top economic forum, the G20 summit will crack down on banker bonuses and urge governments to keep pumping out stimulus money, leaders said Friday.

The meeting in Pittsburgh was overshadowed by a dramatic announcement from host US President Barack Obama, French President Nicolas Sarkozy and British Prime Minister Gordon Brown that Iran had a second nuclear enrichment plant.

As other world leaders scrambled to respond, the summit of the Group of 20 developed and developing nations ploughed on with discussions to ensure there will be no repeat of last year’s financial meltdown.

British Prime Minister Gordon Brown said leaders would agree it was too early for so-called “exit strategies” for the trillions of dollars in stimulus thrown in to support key sectors of the global economy.

“We will also agree it’s absolutely essential as we move to prepare a growth plan where every member of the G20 contributes to how we can meet common and shared objectives.”

Chinese President Hu Jintao said the recovery was not yet solid and called for stepped-up efforts by developed and emerging economies.

Although financial markets were moving towards stability, “we are soberly aware, however, that the foundation of an economic rebound is not yet solid, with many uncertainties remaining,” he told counterparts.

A final statement was not expected till later Friday but a draft confirmed there would be tough new guidelines on banker bonuses and executive pay — highly symbolic issues for taxpayers. Facts: G20 participants

Leaders would advise “limiting bonuses to a percentage of total net revenues when it is inconsistent with maintenance of a sound capital base,” a G20 source said, quoting from the draft.

A dramatic shift in the balance of world power was announced overnight, with the G20 becoming the top economic forum, spreading influence to emerging powers such as China and India.

“Today, leaders endorsed the G20 as the premier forum for their international economic cooperation,” a White House statement said.

“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.”

The G8 — wealthy nations Britain, Canada, France, Germany, Italy, Japan, Russia, and the United States — has served in various forms as the premier economic forum since 1975 and held closely watched annual summits.

In a possible further boon for the emerging world, a Chinese central bank official also predicted a move on International Monetary Fund voting rights, saying developing countries had for too long been under-presented.

“We believe that at tomorrow’s summit a very important political decision will be made on this matter,” Xie Duo said late Thursday, on the sidelines of the summit.

World leaders have pledged to work for comprehensive IMF reform and there is a long-term consensus on the need to address imbalances in voting power, but some European nations have balked at losing their influence.

For Brazil, China, India and other emerging countries, it is crucial to achieve a breakthrough in negotiations in Pittsburgh so the IMF can endorse the reform at its annual meeting on October 6 to 7 in Istanbul.

Obama’s first major summit as host was marred by violence on the first day and overnight as anti-capitalist protesters clashed with police.

Riot officers fired pepper spray and non-lethal rounds Thursday after a 1,000-strong crowd, led by black-clad hardliners wearing goggles, helmets and masks marched towards the conference venue. Analysis

Sixty-six people were arrested following the clashes on the opening day, police said, and the city was braced for more violence on Friday.

G20 meetings are a magnet for anti-capitalists opposed to what they see as an undemocratic body promoting globalization and free market policies.

Obama and First Lady Michelle Obama had opened the two-day summit with a gala dinner in Pittsburgh — chosen as host city to showcase its stunning economic transformation from down-at-heel steel town to high-tech hub.

The gathering of the world’s 19 biggest developed and emerging economies plus the European Union comes just over a year after a US credit collapse triggered a global economic slowdown.

It also comes six months after the same G20 chiefs met in London to coordinate their response to the crisis.

Summit delegates have all pledged to take tough and lasting measures to bring order back to the markets, shore up failing institutions, save jobs and rekindle growth.

Source: WSJ.Com

PITTSBURGH—The Group of 20 nations agreed to put in place an elaborate structure to change global economic policy, but without any enforcement mechanism to make countries live up to their word, critics warned it could be toothless.

For the U.S., winning approval of what the G-20 called “A Framework for Strong, Sustainable and Balanced Growth”  was a major objective. The U.S. also scored another gain, according to negotiators, convincing Europe to a shift in ownership of the International Monetary Fund in favor of developing countries. A deal on restraining executive compensation and boosting the capital that banks need to hold is also in the offing.

“Without sanctions, this agreement doesn’t mean anything,” said University of Maryland economist Peter Morici. “The countries will just discuss changes and make statements.”

Indeed, at the same time the U.S. was pushing a sanction-less procedure at the G-20, the U.S. Britain and France were threatening sanctions against Iran to try to halt what they view as Teheran’s efforts to produce nuclear weapons. In that case, talk and negotiations were seen as insufficient. The Iran issue dominated discussion at the G-20.

G-20 officials say they don’t need sanctions to force them to act on the economic front because the depth of the recession and the need for change is clear to all.  Under the G-20 plan, members will meet periodically to review each nation’s policies and see that they are making necessary adjustments. The IMF will do analyses. The group will act by moral suasion, not sanctions.

“The whole logic is to use discussions and peer pressure to get consensus views” on economic policies, said Montek Singh Ahluwalia, a senior Indian economic official who represents New Delhi at the G-20.

The G-20 draft communiqué also said that nations must continue stimulating the economy “until recovery clearly has taken hold” but also “develop a transparent and credible process for withdrawing our extraordinary … support, to be implemented when recovery becomes fully secured.”

However The G-20 didn’t provide a detailed exit strategy, which it said would  ”vary across countries or regions and across the type of policy measures.”

The U.S. argues that giving the developed and developing world more of an equal ownership of the IMF will boost the Fund’s standing in developing world and make it seem less like a tool of U.S. foreign policy.  .

The U.S. won approval to increase, by “at least” five percentage points, the stake in the IMF held by developing countries. Those countries now have about a 43% share, compared to 57% by industrialized nations. Detailed negotiations over re-allocating the shares will be conducted at the IMF and is scheduled to be finished by Jan. 2011.

The G-20 itself is also becoming the central coordinating body for the global economy, superseding the Group of 8, a move that also gives the developing world a stronger voice.

The last similar effort to address so-called “global imbalances,”—the problem caused by mismatched global supply and demand—was conducted by the IMF in 2006. Called the Multilateral Consultation on Global Imbalances, the U.S., Japan, China, Saudi Arabia and the Euozone committed to make changes along the lines of what the G-20 is urging now. The effort went nowhere largely because the U.S. didn’t push for implementation, said former Bush administration officials.

Then-Treasury Secretary Henry Paulson, a former Goldman Sachs chief who had long experience in China, thought he could cut a better deal bilaterally. Current U.S. Treasury Secretary Timothy Geithner—an architect of the G-20 growth strategy plan—also opposed it because he thought the IMF centralized too much power in the Fund. The IMF process also lacked sanctions.

G-20 officials say they have learned from that effort and others. Also, they say, any effort that involves sanctions would take so long to negotiate that any sense of urgency would pass.

Processes without sanctions “are easier to join,” said Angel Gurria, Secretary-General of the Organization for Economic Cooperation and Development. “People don’t need to dot every ‘I’ and cross every ‘T’ if they aren’t worried about getting whacked by sanctions.”

Chinese Presidend Hu Jintao said Beijing was already taking necessary measures. “We have taken active steps to adjust the domestic and overseas demand structure and the investment and consumption structure, and strike the right balance among the speed, structure, quality and efficiency of economic growth,” Mr. Hu said.

Practically, said Gary Hufbauer, a trade specialist at the Peterson Institute for International Economics in Washington D.C., the G-20 “rebalancing” process depends on the willingness of the U.S. to carry through on its commitments first, such as sharply cutting government spending or raising taxes. Otherwise, he said, they’ll dismiss the effort as inconsequential.

Write to Bob Davis at bob.davis@wsj.com and Jonathan Weisman atjonathan.weisman@wsj.com

Source: Bloomberg.Com

By Simon Kennedy and Helene Fouquet

Sept. 25 (Bloomberg) — Group of 20 leaders said they will crack down on risk-taking by banks and better align economic policies as they turned from crisis management to delivering a new set of rules for the world economy.

President Barack Obama and counterparts meeting in Pittsburgh crafted a plan to force banks to tie bonuses to long- term performance and raise the amount of capital they hold, said officials, citing a draft statement. They vowed to keep stimulus measures until growth takes hold and to narrow disparities in trade and savings. They also announced the G-20 will replace the G-8 as the main forum for steering the global economy.

With a recovery now underway, leaders are trying to temper the excesses that helped trigger the worst financial crisis in seven decades and the deepest recession since World War II. At the same time, richer governments acknowledge they now lack the ability to govern the world economy alone as power shifts to emerging markets such as China.

“The growth of the global economy and the success of our coordinated effort to respond to the recent crisis have increased the case for more sustained and systemic international cooperation,” the draft communique said.

The third summit of G-20 leaders in the past year ends at about 4 p.m. today with a final statement and press conferences.

Economics were eclipsed by security matters this morning as Obama, U.K. Prime Minister Gordon Brown and French President Nicolas Sarkozy lined up in front of cameras to accuse Iran of manufacturing nuclear fuel at a secret underground facility.

Public Anger

Leaders are trying to appease public anger after governments bailed out banks across the world and then watched as they quickly returned to profit and resumed setting aside billions for bonuses. The draft communiqué says leaders will tell banks to avoid “multi-year guaranteed bonuses” and allow awards to be deferred or clawed back, according to an official.

“There is no return to the bad old days,” Brown told reporters. “There is no going back to systems of bonuses that were based simply on short-term speculation and not on the long- term success of companies.”

Financial companies must also limit bonuses as a percentage of revenues when paying them would be “inconsistent with the maintenance of a sound capital base.” The G-20 stopped short of endorsing a French proposal to introduce specific caps on pay.

Buffer

After banks wrote down or lost $1.6 trillion, they will also have to increase the quality and quantity of capital they hold as a buffer against future losses, guidelines which must be implemented by the end of 2012, another official from a G-20 nation said. A leverage ratio for banks, which would manage holdings relative to total assets, will be added to the existing Basel II capital rules, which all members will adopt by 2011.

The test will be whether regulators can enforce the new rules as the rebound in growth and stock markets helps banks regain lobbying strength. If they can, the profitability and equity value of banks from Goldman Sachs Group Inc. to Barclays Plc may fall with their scope to invest and trade, say economists such as former Bank of England official Charles Goodhart.

The revamp of regulation is “for real, but there will be plenty of argument over the detail of how it’s done,” Leon Brittan, vice chairman of UBS Investment Bank and former European Union trade commissioner, told Bloomberg Television today. Brazilian Finance Minister Guido Mantega predicted “greater resistance” from banks to regulation now that the economy is rallying.

Momentum

The G-20 officials met as data suggested a recovery is in place, yet lacking momentum. Demand for U.S. durable goods, unexpectedly fell in August, while loans to European households and companies grew at the slowest pace on record. Still, confidence among U.S. consumers rose this month to the highest level since January 2008 and those in Germany were the most bullish in 16 months.

The mixed picture is leaving governments with no option but to keep up their support of banks and fiscal stimulus, which totals more than $2 trillion, even as their debt mounts. They promised to develop a plan for withdrawing the aid for when expansion is secured.

The governments also agreed to establish a “framework for strong sustainable and balanced growth” and sought the help of the International Monetary Fund as they start to regular assess each other’s attempts to meet that objective. The initiative could see China boosting domestic demand, the U.S. saving more and Europe increasing investment in a bid to even out the lopsided flows of trade and investment that contributed to the credit boom and subsequent bust.

Influence

The growing influence of emerging economies such as China and Brazil was marked by the agreement that the G-20 would supplant the G-8 as the guardian of the world economy. China and other “underrepresented” economies will also gain greater sway at the IMF through higher voting rights, officials said.

Originally established in the 1990s as a forum for finance chiefs, the G-20’s leaders met for the first time in Washington last November and then in April in London. Canada will hold the next summit in June followed by South Korea in November.

The G-20’s new-found status reflects how the recent slump was sparked by the major economies and the rebound is being powered outside their ranks. That’s a reversal from previous international crises when the G-8, whose genesis lies in the oil shock of the early 1970s, drove the recovery. The smaller group will continue to play a role in security and foreign policy issues.

Weight

“With their increasing weight in the global economy, it is natural that the emerging markets assume a greater role in coordination,” said Daniel Price, President George W. Bush’s G- 20 negotiator and now a partner at law firm Sidley Austin LLP in Washington. The challenge will be whether “with a group this large, they will establish effective mechanisms to ensure commitments are fulfilled.”

The leaders also agreed to phase out subsidies for fossil fuels in the “medium term,” without setting a deadline, according to the draft statement. They also plan to intensify their monitoring of tax havens from next month to ensure economies follow through on promises to comply with global standards.

The G-20 members account for about 85 percent of global gross domestic product. They are Argentina, Australia, Brazil, Canada, China, France, Germany, India, Indonesia, Italy, Japan, South Korea, Mexico, Russia, Saudi Arabia, South Africa, Turkey, the U.S., the U.K. and the European Union.

To contact the reporters on this story: Simon Kennedy in Pittsburgh atskennedy4@bloomberg.net; Gonzalo Vina in Pittsburgh atgvina@bloomberg.net

By Hans Nichols and Simon Kennedy

Sept. 25 (Bloomberg) — World leaders will today announce the Group of 20 nations is replacing the G-8 as the main forum for global economic coordination, reflecting a shift in power from rich countries to emerging markets.

The decision, unveiled in a White House statement late yesterday, comes as President Barack Obama, Chinese President Hu Jintao and other leaders gather in Pittsburgh for their third summit in a year to reshape the governance of the world economy following the worst financial crisis since the Great Depression. The G-8 will still exist and may meet on separate matters such as security, a U.S. official said earlier.

The transfer of influence to the broader group, whose membership ranges from the U.S. to China to Saudi Arabia, symbolizes the fact that the richest industrial nations now lack the sway to govern the world economy alone after their excesses sparked the turmoil that tipped the globe into recession.

“The G-20 needs to prove it can make the tough calls and implement agreed outcomes in a timely fashion,” said Tim Adams, who served as the U.S. Treasury’s top international official under former Secretaries John Snow and Henry M. Paulson and is now managing director of the Lindsey Group. “I think it will succeed, but the G-20 must prove skeptics wrong and that will take time and effort.”

The G-20 accounts for about 85 percent of global gross domestic product and was created after a spate of currency devaluations plagued emerging markets from Russia to Thailand in the 1990s. The G-8 oversees about two thirds of global GDP.

‘One Chance’

“What we are trying to do is create a system for economic cooperation across the world,” U.K. Prime Minister Gordon Brown said yesterday. “We have this one chance to make a huge success of international cooperation.”

Originally a forum for finance chiefs, G-20 leaders met for the first time in Washington last November and again in April in London as they sought to rescue the global economy from its deepest slump in seven decades.

The financial crisis has thrust greater responsibility on to the G-20. At the onset of the turmoil, central bankers used talks near Cape Town in November 2007 to hatch a plan to inject more dollars into markets.

The G-20’s new-found power reflects how the recent slump was led by housing and financial market busts in major economies and the recovery is now being driven by countries such as China. That’s a reversal from previous crises when the G-8 was in the driver’s seat of the recovery effort.

China’s Role

China has already overtaken Germany to become the world’s third-largest economy and may soon be named the biggest exporter. It passed Japan a year ago as the main foreign investor in U.S. government debt. China, Russia, Brazil and India together hold about 42 percent of international reserve assets, excluding gold.

“You can’t possibly have a mechanism” for sustaining global economic stability without including China, saidLaura D’Andrea Tyson, an outside adviser to PresidentBarack Obama and former chairman of the White House Council of Economic Advisers under President Bill Clinton. “It’s too big a player in trade and investment.”

Economists at JPMorgan Chase & Co. predict developed economies will shrink 3.3 percent this year and grow 2.8 percent in 2010, compared with growth of 0.5 percent and 5.8 percent in emerging markets.

G-20 leaders meeting today are discussing an agenda aimed at tackling global imbalances, restraining banker pay, raising capital at financial companies and revamping control of the International Monetary Fund.

Bretton Woods

The need for economic policy makers to convene regularly grew out of the turmoil that followed the abandonment of the Bretton Woods system of fixed currencies and the oil shock of the 1970s. In 1975, French President Valery Giscard d’Estaing gathered the leaders of West Germany, Italy, Japan, the U.K. and the U.S. at a summit in Rambouillet, France.

The group soon expanded to seven and its influence reached its zenith through the Louvre and Plaza currency accords of the 1980s and with its responses to financial crises in Asia, Latin America and Russia in the 1990s. It hasn’t intervened in foreign exchange markets since a rescue of the euro in September 2000.

Russia joined after the end of the Cold War to expand it to the G-8, although its officials are still not invited to finance and economic talks.

The G-20’s new formal role may prompt some investors who had dismissed the G-7 as irrelevant to pay more attention to international gatherings.

“On G-7 meeting weekends now I go fishing, no reporters call and writing up summaries of the G-7 for the most part is pointless as there is no news,” David Gilmore, a partner at Foreign Exchange Analytics, wrote in a report to clients today.

The G-20 members are Argentina, Australia, Brazil, Canada, China, France, Germany, India, Indonesia, Italy, Japan, South Korea, Mexico, Russia, Saudi Arabia, South Africa, Turkey, the U.S., the U.K. and the European Union.

To contact the reporters on this story: Simon Kennedyin Pittsburgh at skennedy4@bloomberg.net

Last Updated: September 25, 2009 00:37 EDT

Source: The Jakarta Post

Adianto P. Simamora ,  The Jakarta Post ,  Jakarta   |  Thu, 09/24/2009 11:48 AM

President Susilo Bambang Yudhoyono left Jakarta on Wednesday for Pittsburgh, to attend the US G20 summit, where he will discuss emerging issues including climate change and the global economic downturn.

Yudhoyono was slated to address the G20 summit on the importance of a common agenda to tackle the severe impact of climate change, which puts millions of people at risk.

“President Yudhoyono will be a lead speaker on climate change issues in the G20 summit to remind the leaders not to forget the serious impacts of climate change amid the global economic downturn,” presidential spokesman Dino Patti Djalal told reporters.

Accompanied by First Lady Ani Yudhoyono, the President left with Finance Minister and Acting Coordinating Minister for Economic Affairs Sri Mulyani, Trade Minister Mari Elka Pangestu and Indonesian Chamber of Commerce and Industry (Kadin) chairman M.S. Hidayat.

President Yudhoyono was also expected to hold bilateral meetings with Japanese Prime Minister Yukio Hatoyama and Australian Prime Minister Kevin Rudd on the sidelines of the two-day summit.

“In a meeting with Rudd, President Yudhoyono will discuss environmental and forestry issues,” Dino said.

Rich and developing nations continue to disagree on how to cut carbon dioxide (CO2) emissions, the main source of global warming, and who should pay.

The developing nations deemed to suffer the most from climate change have long demanded that the rich nations provide financial assistance to deal with its impact.

President Barack Obama is calling on the world to end massive government subsidies that encourage the use of fossil fuels blamed for global warming.

The US president, who is set to host the G20 economic summit opening Thursday, will propose a gradual elimination, with the time frame to be determined, White House officials said.

“Later this week, I will work with my colleagues at the G20 to phase out fossil fuel subsidies so that we can better address our climate challenge,” Obama said Tuesday at the United Nations global warming summit as quoted by AP.

From Pittsburgh, Yudhoyono is scheduled to deliver a lecture on inter-faith harmony at Harvard University in Boston on Sunday.

The G20 brings together the leaders of industrial and emerging market countries in the planet.

It represented about 90 percent of the global gross national product and two-thirds of the world’s population.

It was the third summit since the collapse of investment bank Lehman Brothers a year ago, with their focus now shifting from combating the worst recession since the 1930s to discussing how to prevent it from happening again.

Central to the talks will be a US plan to correct the world’s economic imbalances by shrinking surpluses in big exporting countries like China and boosting savings in debt-laden nations including the US.

President Barack Obama wants a framework of “mutual assessment” where the International Monetary Fund (IMF) would make policy recommendations on rebalancing to the G20 every six months, according to a paper obtained by Reuters.

Also up for discussion in Pittsburgh will be reforms to the IMF, trade policy, and global warming.

India’s prime minister Manmohan Singh called for a strong warning against protectionism as he set out for the gathering.