Economic officials from 20 leading nations called Sunday for increased government spending to boost the troubled global economy and said developing countries deserve a prominent role in talks to overhaul the world financial system.
Finance ministers and central bank presidents from the Group of 20, which includes wealthy and developing nations, agreed the world must work together to address the current crisis. But they approved no specific plans ahead of a meeting of G-20 heads of state set for Washington next week.
Ministers urged governments to increase spending or cut taxes as they can to help reverse an economic downturn that is expected reduce global trade next year for the first time since 1982.
Each country will have to design its own stimulus package to meet its specific needs, said David McCormick, the U.S. Treasury’s undersecretary for international affairs.
The G-20 also backed a call to bolster developing nations’ voting power in key groups including the International Monetary Fund and the World Bank, following decades of complaints that their voices have been stifled.
“Institutions must be comprehensively reformed so that they can more adequately reflect changing economic weights in the world economy and be more responsive to future challenges,” the ministers’ declaration said.
Yet the statement failed to address a French proposal that large emerging economies including Brazil, Russia, China and India be added to the powerful Group of Eight industrial nations, which has huge influence over global economic policy.
Emerging economies say the international financial system drawn up by rich nations in the 1940s failed to prevent the current crisis or identify its causes, fueling their case that they should have a role in crafting a solution.
G-20 heads of state will debate ways to reform the financial system in Washington, where Brazilian Finance Minister Guido Mantega says they’ll be under pressure to act fast.
“We’ll have to change the tires of the car with the car moving. This means in 60 to 90 days we’ll need the solutions for new financial regulation,” he said.
European leaders last week proposed a 100-day deadline for drafting the overhaul.
Most G-20 officials attending the Sao Paulo meeting concluded that major bailout packages in the U.S., Europe and elsewhere have so far failed to re-establish the credit lines and confidence needed to ease the crisis, making additional measures necessary, Mantega said.
When possible, governments should take emergency action to boost spending and cut taxes or interest rates to encourage growth and counter an economic downturn that is slowing trade.
China on Sunday announced $586 billion in infrastructure and public welfare spending to slow the crisis’s impact on its economy, the world’s fourth-largest.
Brazil has sold billions of dollars in reserves and issued loans from state banks to prop up its currency and provide credit to fund-starved companies, but is also willing to increase public spending if needed, Mantega said.
Officials from some developing nations suggested the U.S. and other countries where the current crisis started should reimburse emerging economies for financial losses suffered when rattled foreign investors dumped assets in recent months, Mantega said without naming those nations.
The G-20 declaration did not address that issue, and McCormick said Washington believes its efforts to revive the U.S. economy will help other nations.
“We’re trying to take a certain set of actions that have benefits not only for our economy, but also for the global economy,” he said.