Nations Craft Hard-Fought Pledge To Repair World Financial System
Friday, April 3, 2009
LONDON, April 2 -- President Obama and the leaders of the world's largest economies on Thursday declared their intention to create a new era of worldwide financial oversight and government investment in a move to shore up the collapsing global economy.
Setting aside differences in philosophy and national character, at least for now, the leaders agreed to make available more than $1 trillion in new lending to spur international growth. While leaving it to individual nations to enact, they promised tough new regulations aimed at banks and other financial institutions whose freewheeling activities sparked the crisis. And they vowed renewed support for trade and more help for the globe's poorest countries.
"The world's leaders have responded today with an unprecedented set of comprehensive and coordinated actions," Obama said, in the spotlight on his first overseas trip as president. "Faced with similar global economic challenges in the past, the world was slow to act, and people paid an enormous price. . . . Today, we have learned the lessons of history."
The consensus was remarkable given the discord that preceded Thursday's meeting. For weeks, European leaders balked at what they perceived as Obama's insistence that they increase spending and his resistance to tougher worldwide regulation.
The effort to rescue the global economy relies on an indirect infusion of cash for rich and poor countries as a way to boost liquidity for individuals and businesses and spur spending. After news of the agreement, the Dow Jones industrial average shot up, rising 2.8 percent and 216 points to land at 7978.
Having crossed the Atlantic to press his counterparts to action at the G-20 summit, Obama nonetheless conceded that "in life, there are no guarantees. And in economics, there are no guarantees. The people who thought they could provide guarantees, many of them worked at AIG, and it didn't work out so well."
Obama met privately with Saudi Arabia's King Abdullah and South Korean President Lee Myung-bak. Obama leaves Friday morning for Strasbourg, France, as he shifts his focus to security issues and the future of the NATO alliance. On Saturday, he is scheduled to give a major address on nuclear proliferation from a public square in Prague.
Weeks of negotiations endorsed by the 20 heads of state produced a series of sometimes vague directives and broad principles that will require quick action by individual governments if they are to stave off a deepening recession. The prescriptions are not backed up by any punitive measures for countries that fail to implement them.
But Obama and other leaders expressed optimism that commitments they called unprecedented in modern history will arrest the financial free-fall and begin to rebuild a new international economy less vulnerable to disaster.
"This was the day the world came together to fight back against global recession," British Prime Minister Gordon Brown said as the summit concluded.
Along with declarations of optimism came the recognition of at least a temporary shift in attitude away from two decades of intense reliance on free trade, deregulation and market-knows-best policies that fueled stunning growth across the planet.
Brown -- the leader of a country closely associated with that philosophy -- declared "the Washington Consensus" over, using a term that recognizes the American roots of an economic system seen by many in the world as unfair and unhealthy.