By Glenn Kessler and Anthony Faiola
Washington Post Staff Writers
Thursday, November 13, 2008
World leaders will meet in Washington this weekend for a summit on the global financial crisis, the largest gathering of presidents and prime ministers here since NATO's 50th anniversary celebration in 1999. But overshadowing the emergency conference is a leadership vacuum that is fundamentally altering the balance of power.
With President Bush about to fade into history and President-elect Barack Obama reluctant to signal his intentions, other nations are moving to set the agenda at the Saturday meeting of more than 20 heads of government.
French President Nicolas Sarkozy has decried as "mad" the "all-powerful market" and urged bold reforms, including restrictions on executive pay. China, meanwhile, has announced a $586 billion fiscal stimulus plan, giving momentum to calls for other nations, including the United States, to follow suit.
But the gap between Bush's positions and his successor's could make for a difficult situation for the United States. The Bush administration, for instance, has been wary of congressional demands for a new fiscal stimulus, while Obama has said he would approve one as soon as he takes office if it's not done beforehand. Similarly, Bush is pushing for a commitment to free trade in the summit communique, even though Obama has expressed skepticism about some of the trade deals negotiated on Bush's watch.
"It's a huge opportunity for other countries to try to make than themselves more center stage than usual," said Simon Johnson, former chief economist at the International Monetary Fund and a senior fellow at the Peterson Institute for International Economics in Washington. "Normally there is a clear U.S. agenda that bangs against other agendas, and ordinarily the American president sets the tone. But Mr. Bush largely seems to have checked out on these issues."
Obama has said he will not attend the summit and none of his aides will be there. Because of overwhelming demand to meet with him, his advisers have arranged for two supporters -- former secretary of state Madeleine Albright and former GOP Rep. Jim Leach -- to see world leaders on his behalf.
White House officials have also provided extensive briefings to Daniel Tarullo, an international economics expert designated by Obama to be his liaison for the summit.
"Clearly it is not helpful" that the United States is in the midst of a presidential transition, said a senior French official, speaking on condition of anonymity because of diplomatic sensitivities. "But the feeling is we could not wait longer. President Sarkozy is going to be very energetic at this summit."
Dan Price, a White House official who has handled U.S. preparations for the summit, said officials expected to agree on a broad action plan, including setting up working groups on such issues as overhauling financial regulations. That plan would be considered at another summit of the leaders next year -- after Obama takes office.
"One, let us identify what needs to be done," Price said, summing up Bush's goals for the meeting. "Let us begin that task now. Let us continue that task through the future. And then, finally, let us do so against the backdrop of a commitment to open trade and investment and to meeting the needs of the least fortunate."
Price disputed suggestions that the timing of the summit was inappropriate. "We believe that the gathering of these leaders at this time is timely, is appropriate," he said. "I actually think there is a lot more common ground among countries who will be around the table than the rhetoric might suggest."
Klaus Scharioth, Germany's ambassador to the United States, said the stakes are high this weekend.
"Since the end of the Cold War, our notion of good governance was basically unchallenged. With the international financial system in distress, now the idea of free markets is put in question in large parts of the world," he said. "We have to be very careful of the fallout of this crisis: The legitimacy of the notion of free markets, of our notion of good governance and of the international institutions, if not reformed, might be challenged. We have to act now, swiftly and decisively."
The meeting is officially a gathering of the Group of 20, an organization that lacks the notoriety and influence of the Group of Seven industrialized powers. It was formed during the Asian financial crisis in the 1990s to provide a forum that would include the G-7 nations and developing countries such as China, India, Brazil, South Africa and Saudi Arabia.
Until now, the group -- which represents nearly 90 percent of the world's gross domestic product -- has been designed as a forum for financial ministers; never before have the leaders of its members, 19 countries plus the European Union, gathered together. (Spain and the Netherlands, while not G20 members, are also attending as representatives of the E.U.)
Robert B. Zoellick, the president of the World Bank, said that the inclusion of developing countries was important. "It would be an error of historic proportions if developed countries put in place policies, structures and norms that undermined or excluded the interests of developing countries," said Zoellick, who will also attend the summit. "Many governments in developing countries have taken courageous steps over the last years to put their own houses in order, and this crisis is not of their making."
"This is a very good opportunity for the emerging markets, for the Chinese, the Indians and maybe Brazil to put some interesting things on the table," Johnson said.
But because of the unique circumstances of the U.S. presidential transition, William J. Antholis of the Brookings Institution said: "I do think the leaders assembled will be looking at President Bush and not expecting him to be leading them. The expectation is not that George Bush will lead a path out of this mess. This meeting might be a patch on a tire losing some air. But at some point, we have to change the wheel."
Nigel Sheinwald, the British ambassador to Washington, indicated that Prime Minister Gordon Brown would push for an emphatic statement on coordinated fiscal stimulus, much like the coordinated efforts in recent weeks by central banks.
"We now believe that the summit needs to send a clear message that a broad, concerted economic response is needed now," Sheinwald said, "and we believe that the benefit of fiscal action in one country will be all the greater in that country if other countries are acting at the same time."
David H. McCormick, the Treasury undersecretary for international finance, acknowledged that "probably a significant portion of countries are thinking about near-term response. So it will be an important topic." But he noted the Bush administration signed a stimulus package earlier this year, and so that makes "the likelihood of everybody being at the same place in terms of a fiscal measure very unlikely."