G20 summit battles to save world economy

LONDON (AFP) – The 20 world leaders heading for a London summit this week on how to save the global economy are fighting off talk of an inter-continental split even before they sit down for talks.

US President Barack Obama and the other Group of 20 (G20) leaders are each proposing different economic salvage plans, different ways to regulate financial markets and different sanctions to answer public anger over bankers’ bonuses.

Ending tax haven secrecy and helping the world’s poor will also be hammered out in talks in an east London conference centre overlooking the British capital’s financial district that faces the threat of an invasion by an army of anti-G20 demonstrators.

“The most important task for all of us is to deliver a strong message of unity in the face of crisis,” Obama told the Financial Times newspaper in an interview before heading to Europe for a double summit tour – G20 and NATO.

“We need to deal with the problems right in front of us and we also need to make sure we are taking steps to prevent these types of breakdown from happening again.”

Summit host, British Prime Minister Gordon Brown wants the gathering to steer the world out of the worst downturn since the Great Depression and lay the foundations for a new regulated financial system.

Obama has supported Brown’s calls for coordinated action, but says it is a “phoney debate” to claim the United States and European countries want different things from the London summit.

There are clear divisions over Brown’s appeal for a new stimulus package. Even the head of the Bank of England has thrown doubt on his plans, saying more borrowing is unsustainable.

Brown remained adamant after a pre-summit tour of three continents, however, that a global action on financial regulation is required.

“It is absolutely clear that the global institutions that we built in the 1940s are quite incapable of dealing with the problems that we have now,” he told politicians meeting in Chile.

A draft summit communique obtained by the Financial Times is sketchy about a global fiscal stimulus package, but the G20 leaders do predict that the world economy will start to grow again by the end of 2010.

The 24-point communique also reportedly reiterates pledges to avoid protectionism.
German Chancellor Angela Merkel has warned she has no intention of injecting more money and against excessive expectations for the summit.

“We are talking about building a new global financial market architecture and we will not be able to finish this in London … We will definitely need to meet again,” Merkel told the Financial Times on Saturday.

China, which has blamed the United States for causing the crisis, has also indicated it will not be bringing a blank cheque to the table.

While a coordinated stimulus agreement looks increasingly unlikely, most countries do agree on the need to drastically boost funding for the International Monetary Fund so it can shore up troubled emerging economies.

The summit also aims to push for rapid action on tackling problems in the banking system, especially the large amount of ”toxic” assets, many linked to flawed home loans, that banks cannot offload.

But even if action is agreed, most observers are likely to see the summit as a flop if it fails to show coordinated action on pumping fresh money into the economy.

US Vice President Joe Biden on Saturday defended massive US spending as necessary to boost sinking world economies and urged other countries to think outside their borders.

“We are aggressively protecting our domestic policy agenda but thinking globally as well,” Biden said in Chile, referring to the 787-billion-dollar (592-billion-euro) US stimulus plan.

Protest organisers claim that an “unprecedented” alliance of groups will target the summit, stretching the thousands of police on duty to the limit.

On Saturday, 35,000 people marched through London under the Put People First banner, in a peaceful protest calling for fresh thinking on rescuing jobs and savings.

Climate change protesters are planning to set up camp in the City of London financial district on Wednesday, and the police are worried that anarchists could spark violence.

Analysts predicted that the G20 meeting will inevitably lead to disappointment.
Howard Wheeldon, senior strategist at London-based BGC Partners, said “even if they (the leaders) might appear to agree don’t expect that much action.

“The US and Britain apart, care and caution will be the watchwords for most economies, just as they should.”