World leaders on Friday issued sweeping promises to fix a malfunctioning global economic system in hopes of heading off future financial meltdowns. President Barack Obama said actions taken so far “brought the global economy back from the brink.”
“We leave here today confident and united,” Obama said at the conclusion of a two-day gathering of the world’s 20 top economies to deal with the worst financial crisis since the 1930s.
The leaders agreed to keep stimulus plans, which include government spending and low interest rates, generally in place in their respective countries for now to avoid derailing still-fragile recoveries. Obama had pressed for just such a course and praised the decision.
“Our coordinated stimulus plans played an indispensable role in averting catastrophe. Now we must make sure that when growth returns, jobs do, too,” he said at a wrap-up news conference. “That’s why we will continue our stimulus efforts until our people are back to work and phase them out when our recovery is strong.”
In a statement, all the G-20 leaders declared major progress from what they called their coordinated efforts and “forceful response.”
“It worked,” they said.
Although many of the pronouncements and actions taken by the leaders lacked specifics or details on follow-through, leaders were bold in pronouncing the gathering — the third G-20 summit in a year — as a big success.
“There was unanimity around the table that the errors of the past won’t happen again,” said French President Nicolas Sarkozy.
“The old system of international economic cooperation is over. The new system, as of today, has begun,” said British Prime Minister Gordon Brown, referring to a decision to enhance the status for the Group of 20 to make it the lead group for dealing with future international economic issues, eclipsing the older, Western-dominated Group of Eight.
“I have the impression that we are on a successful path,” said German Chancellor Angela Merkel, before leaving Pittsburgh to fly back to Berlin, where she faces German voters on Sunday.
They moved to require members to subject their economic policies to the scrutiny of a peer review process that would determine whether they were “collectively consistent” with sustainable global growth. They promised tighter and more coordinated financial regulation.
And, repeating pledges from G-20 summits in November and April, when financial panic was rampant, they vowed anew to “reject protectionism in all its forms.” They also went along with Obama’s push for a pledge to withdraw government subsidies from fossil fuels such as oil, coal and natural gas linked to global warming.
While issuing lofty vows, the leaders failed to define how to accomplish many of them and were quickly back to bickering over details.
They did not suggest, for instance, how the peer review process would be enforced. And they failed to mention that previous pledges to avoid protectionism had been ignored by nearly all 20 members.
Disagreements over whether China should gain voting strength in the International Monetary Fund at the expense of European nations and over global warming language marred the summit.
Obama talked about actions of the G-20 as creating or saving “millions of jobs.” Yet the U.S. economy alone has lost 3.1 million jobs since January when Obama took office. Since the recession started in December, 2007, some 6.9 million jobs have disappeared.
The group agreed to support changes in the makeup of the International Monetary Fund and World Bank.
The final statement said voting powers in the IMF “should reflect the relative weights of its members in the world economy, which have changed substantially in view of the strong growth in dynamic emerging market and developing countries.”
Now, developed industrialized nations wield about 57 percent of the voting rights in the IMF to about 43 percent for developing nations. The G-20 leaders called for shifting shares from developed powers to emerging ones by at least 5 percentage points. They called for a similar shift at the World Bank. European countries, particularly France and Britain, have been resisting such changes.
Said Obama: “We brought the global economy back from the brink. We laid the groundwork today for long term prosperity.”
“Pittsburgh was a perfect venue for this work,” Obama said of the one-time despairing Rust Belt city. “This community has known its share of hard times. It picked itself up and dusted itself off. It serves as a model for turning the page to a 21st century.”
Obama brushed off demonstrations in the city. He said they were mild compared with some in the past at international gatherings.
“I fundamentally disagree with their view that the free market is the source of all ills,” he said. “Many of the protests are just directed generically at capitalism. ... One of the great things about the United States is you can speak your mind.”
Obama said that tough new financial regulations backed by the G-20 summit would help avoid another economic crisis.
He also said that G-20 leaders would spare no effort to reach a global warming agreement at an international gathering later this year in Copenhagen. Summit leaders agreed to Obama’s call to reduce government subsidies for fossil fuels. He said if fully implemented, the move would phase out $300 billion in global subsidies.
“All nations have a responsibility to face this challenge,” he said.
Obama circulated among the leaders before the talks began, speaking to Chinese President Hu Jintao and Russian President Dmitry Medvedev.
Said Hu: “The foundation of an economic rebound is not yet solid, with many uncertainties remaining. A full economic recovery will take a slow and tortuous process.”
In an apparent reference to a recent trade spat in which the United States imposed punitive tariffs on Chinese tire imports, Hu called on the leaders to “resolutely oppose and reject protectionism in all forms.”
Leaders papered over differences on the executive bonus issue by avoiding language for specific caps, something that France had pushed for but that the United States had opposed. A U.S. push for stronger requirements for bank capital — the cushion that banks hold against loan losses — was included, but with many of the specifics over how the capital would be determined left to set at later meetings.
The leaders also agreed to a U.S. proposal for a “framework for strong, sustainable and balanced growth” to deal with such issues as China’s huge trade surpluses and the soaring U.S. budget deficit.
The streets of Pittsburgh were generally calm. A few thousand demonstrators pledging nonviolence banged drums, danced and held signs advocating assorted causes.