G-20 Leaders Reach Consensus on Financial Reform
Friday, September 25, 2009
PITTSBURGH, Sept. 24 -- The Group of 20 largest economies will permanently replace the G-8 as the main forum for international economic cooperation in a move expected to give greater clout to developing nations, a senior White House official said Thursday night.
The change, which has been pushed by President Obama, will be announced Friday by world leaders attending the G-20 economic summit in Pittsburgh. It would make official a growing consensus that the G-20's broader membership better represents a new global economy.
Traditionally, the Group of Eight has served as the gathering place for the world's top economic powers, but in recent years its membership -- dominated by the United States and other Western nations -- has increasingly been criticized for leaving out several of the world's fastest-growing countries.
The G-20's ranks include nations such as Brazil, China, India and South Africa -- all of which have expanded their economies at a meteoric pace in the past two decades. The G-8 will continue to meet on matters important to its member countries, according to the official, who discussed the move on the condition of anonymity because it has not been formally announced.
As leaders gathered on the eve of Friday's meetings, U.S. Treasury Secretary Timothy F. Geithner said that officials had reached "a strong consensus" on strengthening oversight of the global financial system.
Before the summit, the United States and European nations had emphasized different elements of reform, with U.S. officials stressing the need to raise the quality and quantity of capital held by banks to cover potential losses and the Europeans pushing hard for tough restrictions on bankers' pay. But Geithner said the parties were close and that their differences were not insurmountable.
"We are not going to walk away from the worst financial crisis since the Great Depression and leave unchanged and leave in place the tragic vulnerabilities that created this crisis," he said.
Geithner said the United States had made progress toward achieving another top priority: getting G-20 members to commit to economic policy changes that could help avoid a repeat of the financial crisis.
The United States thinks that reducing export-dependent economies' reliance on U.S. consumers is vital to sustained global growth. The Obama administration has proposed requiring the United States to commit to saving more and getting countries such as China and Germany to boost domestic consumption. Under the proposal, the International Monetary Fund would help monitor whether countries comply, but the measure is largely unenforceable.
Geithner also said that the G-20 members were closer to an agreement on phasing out subsidies for fossil fuels, a proposal Obama raised earlier in the week at the United Nations that could help significantly reduce carbon emissions.
Despite the upbeat report from U.S. officials, expectations for the summit remained modest. G-20 leaders already agreed to sidestep the thorny issue of when to begin withdrawing the hundreds of billions of dollars spent to jump-start their economies. Nor were they expected to commit huge new sums of money as they did in April, when they agreed to triple the IMF's resources. Instead, attendees cast this meeting as a moment to take stock of what they have done and to discuss how to avoid similar crises in the future.
The spirit of transformation is what inspired Obama to choose Pittsburgh as the summit site. The city has reinvented itself from one heavily dependent on the steel industry to one with vibrant clean-technology, finance and health-care sectors.