G20 commits to $1-trillion global stimulus package
The G20 nations will inject $1 trillion into the world economy in an effort to curb the global financial crisis, British Prime Minister Gordon Brown announced Thursday as the group's summit concluded.
In his closing news conference in London, Brown said the countries have committed to six goals that will result in the largest economic stimulus package the world has ever seen.
Included in the summit's communiqué are commitments to bring hedge funds within a global regulatory net, to end bank secrecy, to maintain expansionist policies and to inject $250 billion in trade finance into the global economy over the next two years.
The leaders of the world's major economies assembled at the ExCel centre in London's Docklands district with the hope of developing co-ordinated rules for financial markets to help spark a global recovery.
The funding announced Thursday will come through several institutions, including the World Bank and the International Monetary Fund.
The package will create "an unprecedented fiscal expansion," Brown said.
The package includes $500 billion for the IMF, plus $250 billion special drawing rights from the reserve currency for member countries of the IMF and $250 billion to boost trade, Brown said.
Canadian officials have said that Canada will be providing an additional $10 billion US for emergency IMF assistance and is putting $200 million into the trade fund.
Brown said the summit represented a "day the world came together to fight back against the recession."
"Today the largest countries in the world have agreed to a global plan for recovery and reform," he said. "I think the new world order is emerging and with it the foundations of a new and progressive era of international co-operation."
The wording of the communiqué includes stern language on international financial reform, indicating credit agencies will be regulated to end conflicts of interest.
A new Financial Stability Board will also be established to provide an "early warning mechanism," Brown said.
"The banking secrecy of the past must come to an end," he said.
An international group to supervise financial institutions will be developed and will monitor pay and bonuses to ensure they reflect actual performance, he said.
"We want to encourage corporate responsibility in every part of the world," Brown said.
Going into the meeting, U.S. President Barack Obama and Brown had expressed confidence that world leaders would come up with a strong agreement to address financial regulation, growth and troubled banks.
The result of the one-day gathering was swiftly praised by German Chancellor Angela Merkel and French President Nicolas Sarkozy.
Sarkozy praised Obama and Brown at the end of the meeting, despite having threatened earlier to walk out if unsatisfied with the outcome. The French leader said Obama helped in creating consensus and in persuading China to agree to publish lists of tax havens.
Obama was a "very open man" and "completely in line with what we wanted: that politicians take their responsibilities," Sarkozy said.
Sarkozy and Merkel pushed the G20 to publish a blacklist of tax havens.
"We have agreed on tough standards and sanctions for use against those who don't come into line in the future," he said.
Later Thursday, the Organization for Economic Co-operation and Development blacklisted the Philippines, Uruguay, Costa Rica and the Malaysian territory of Labuan as the four most unco-operative tax havens, saying they had refused to adopt new rules on financial openness.
Leaders also said nations that refuse to exchange tax information could in the future face tough sanctions — including the withdrawal of financing by the World Bank or the IMF.
'Almost historic compromise'
Merkel praised the outcome of the G20 meeting, saying it was a "very, very good, almost historic compromise."
Canada reportedly joined with France and Germany in persuading the other leaders to back tougher language on stronger financial regulations to avoid a repeat of the current crisis.
Leaders have also agreed to kick-start the stalled Doha trade talks when the G8 meets in Italy in July, Brown said.
Police in London remained on high alert on Thursday, erecting barricades and checkpoints within an 800-metre radius of the ExCel Centre, as hundreds of protesters gathered outside and in the city's financial district.
More than 4,000 protesters demonstrated in London's financial district on Wednesday ahead of the economic summit. At least 86 people were arrested in connection with the rally, which turned violent and resulted in vandalism at the Bank of Scotland building.
One man at the demonstration was reported to have died after collapsing in the crowd.
With files from the Associated Press and the Canadian Press