Facing the gravest economic crisis in decades, the leaders of 20 countries agreed Saturday to work together to revive their economies.
They put off thornier decisions about how to overhaul financial regulations until next year, providing a serious early challenge for the Obama administration.
Though the measures were cast as ambitious reforms, they mainly reflected steps that the countries were already undertaking to grapple with the crisis. What remains to be seen is whether the leaders will cast aside political and economic differences to embrace more radical changes, including far-reaching but hotly debated proposals to overhaul regulation.
The group planned its next meeting for April 30 – 101 days after Barack Obama is sworn in as president.
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Obama, who sent emissaries but did not attend the meeting, will find common ground with the leaders in his support of a further stimulus program in the U.S. – something President Bush opposes. The group called for more fiscal measures to cushion the blow of a downturn that is hitting rich and poor countries.
Two senior advisers for Obama, Madeleine Albright and James Leach, met privately with leaders on the sidelines. And Obama addressed the meeting only obliquely Saturday in his first radio address as president-elect, in which he expressed appreciation that Bush “has initiated this process, because our global economic crisis requires a coordinated global response.”
Meeting in Washington, in the capital of the country where the crisis began, leaders from the U.S., France, China, Russia, Saudi Arabia and other countries began what they said would be a broad reform of the institutions that have governed global markets since World War II.
In a five-page communique that mixed general principles with specific steps, the Group of 20 pledged to bolster supervision of banks and credit-rating agencies, to scrutinize executive pay and to tighten controls on complex derivatives, which deepened the recent market turmoil.
“Our nations agree that we must make the financial markets more transparent and accountable,” Bush said. He warned that “a meeting is not going to solve the world's problems,” and described the talks as the beginning of a process that would carry over to the next administration.
As indicated by dueling briefings and statements through the weekend, bridging ideological gaps among nations grappling with different versions of the economic contagion will provide the new president and other world leaders with a serious challenge.
There is also a more basic philosophical divide across the Atlantic: Europeans in general favor more state control over markets, even to the point of granting regulators cross-border authority, while the U.S. stresses the primacy of national regulators. French President Nicolas Sarkozy, who called on Bush to organize the meeting, alluded to those differences, saying the negotiations had been challenging.
“I am a friend of the United States of America, but if you ask, was it easy? No, it wasn't easy,” Sarkozy said, adding that he did not fly to Washington “simply for the pleasure of traveling.”
He said the Americans had made concessions even by agreeing to discuss issues such as regulatory coordination and executive pay. The communique, however, suggested there were concessions on both sides.
Prodded by Bush, who earlier in the week gave an impassioned defense of capitalism, the leaders reaffirmed their commitment to free markets and trade. But they also clearly laid blame for the crisis at the doorstep of the U.S., saying “some advanced countries” had taken inadequate steps to prevent a build-up of dangerous risks.
The meeting set out a road map for overhauling regulations in a wide range of areas, and assigned the work to groups of experts. At the next meeting, which Sarkozy proposed to hold in London, the leaders will debate specific proposals developed by those groups.
Among those measures is a European proposal to set up so-called colleges of supervisors, which would meet regularly to share information about global banks with operations in many countries.
Another idea is to expand the membership of the Financial Stability Forum, an influential group of finance ministers and central bankers from industrialized countries, to include emerging markets like Brazil and China.
Still, for all the talk of action and history-making change, some experts said the outcome was disappointing.
“This is plain-vanilla stuff they could have agreed on without holding a meeting,” said Simon Johnson, an economist at the Massachusetts Institute of Technology and a former chief economist of the International Monetary Fund. “What's new, except that this is the G-20 instead of the G-7?”
Despite broad support for economic stimulus, the leaders were not able to agree on a coordinated global effort. The Bush administration, which does not favor a further stimulus, resisted that idea. And the proposal for colleges of supervisors fell short of an international regulatory agency favored by the French. The Bush administration opposes any regulatory agency with cross-border authority.
The statement did not single out hedge funds as needing regulation, which Germany has long advocated. German diplomats said they were satisfied that the issue would be addressed later. “There shall be no blind spots,” said the German chancellor, Angela Merkel.
Despite playing up the role of the International Monetary Fund as a vehicle for helping developing countries in crisis, the leaders did not call for an expansion in the fund's lending resources.
That came despite Prime Minister Gordon Brown of Britain's effort to solicit countries with large foreign-exchange reserves, like China, Japan and Persian Gulf oil producers, to bolster their contributions to the IMF.