U.S. Urges Boost in Reserves at G-20 Meeting as Europeans Decry Bonuses
Saturday, September 5, 2009
LONDON, Sept. 4 -- Top finance officials debated the next steps for the recovering global economy on Friday, with European countries pushing for a crackdown on bankers' bonuses while the United States stressed the need to boost bank reserves to prevent a repeat of the financial crisis.
Members of the Group of 20 major nations also discussed ways to unwind recent economic stimulus efforts, although all agreed that withdrawing the massive amounts of money injected into the ailing world economy any time soon could risk a double-dip recession.
Finance ministers and central-bank officials from rich and developing countries representing 80 percent of world economic output are convening in London through Saturday amid mounting signs of a modest economic rebound, with Japan, Germany, France and Australia all recording growth in the second quarter. Britain is widely expected to do so in the third quarter.
Germany has pushed for G-20 nations to start talking about when and how they will withdraw stimulus measures, but other nations were cool to that idea. French Finance Minister Christine Lagarde said she was happy to discuss coordinating an exit strategy but stressed that the timing was something that "God only knows."
European countries have stressed the role that excessive payouts to banking executives played in the current crisis by fueling risk-taking, and called for bonuses to be severely curbed. G-20 leaders promised at their meeting in April to pass tough new principles on compensation, but little progress has yet been made.
The European push on bonuses has received a lukewarm response elsewhere within the G-20. Britain has stopped short of some of the more stringent rules proposed by France and Germany on curtailing bonuses.
U.S. Treasury Secretary Timothy F. Geithner has not raised the bonus issue either, preferring instead to focus on U.S. attempts to start talks on a new international accord to increase banks' capital reserves.
The U.S. proposal would establish stronger global standards for the reserves banks are required to hold to cover potential loan losses. The United States wants to reach an accord by the end of 2010, with countries agreeing to implement the plan by the end of 2012.
Developing countries have their own agenda at the London meeting, including faster action on changes to give them a greater say in governance of financial markets.
The G-20 countries have agreed to review the leadership of institutions such as the World Bank and International Monetary Fund, which has received pledges of more money to help struggling countries. The IMF is customarily headed by a European and the World Bank by an American.
Brazil, Russia, India and China -- the so-called BRIC quartet -- argue that reform of international financial institutions is crucial to ensuring a stable and balanced global economy. They want a shift in voting power in favor of developing countries.