World leaders to gather on crisis, no quick fix seen
WASHINGTON (Reuters) - A bid by global leaders to push forward plans this weekend to erect a firewall against future financial crises like the one now threatening the world economy will quickly run into tough political realities that will limit progress.
Leaders from the Group of 20 advanced and emerging economies are being hosted on Friday night and on Saturday by a U.S. president who will be out of office in little more than two months and who is under pressure from Europe to agree to stricter market regulation than he prefers.
Such key questions of global finance were once largely the domain of the rich Group of Seven nations, but the doors this time are thrown open more widely in recognition of the growing clout of other nations.
However, bringing emerging-market members into the gathering carries its own tension as wealthy nations seek a new role for institutions like the International Monetary Fund, which is viewed with reservation by many developing nations.
But as the world sinks into a recessionary funk, political chiefs are under strain to show they at least know why fortunes turned so severely and what must be done to ease the worst financial crisis since the 1930s Great Depression.
U.S. President George W. Bush on Thursday sought to keep a focus on measures for spurring growth rather than scrutiny of inadequacies in U.S. regulation, which European officials see as a root cause of crisis.
"While reforms in the financial sector are essential, the long-term solution to today's problems is sustained economic growth," Bush told a New York audience. He said critics were "equating the free enterprise system with greed, exploitation and failure" and objected to it.
"The answer is not to try to reinvent that system," Bush said. "It is to fix the problems we face, make the reforms we need, and move forward with the free-market principles that have delivered prosperity and hope to people around the world."
AIRING DIFFERENCES
Improving regulation is a broad topic for G20 leaders but there are long-standing differences, especially between European officials and the Bush administration, about the degree to which markets should be subject to stiffer rules.
German officials said before the meeting that it will discuss "a new balance between market and state," possibly a more ambitious aim than the Bush administration favors.
At a briefing on Wednesday, the White House's deputy national security adviser for international economic affairs, Dan Price, said market turmoil shows the need for "some changes in today's regulatory structures" but within limits.
"We are unaware of any support from any quarter for empowering a single global authority to regulate the world's financial markets," Price said, without referencing where he had heard such a suggestion made.
French President Nicolas Sarkozy sounded an aggressive note on Thursday as he prepared to head for the summit.
"I am leaving for Washington to explain that the dollar, which after the Second World War was the only currency in the world, can no longer claim to be the only currency in the world," he said. "What was true in 1945 cannot be true today." Continued...
