November 15, 2008 / 12:04 AM / 9 years ago

World leaders agree to act fast against recession

<p>An overall view of world leaders attending the first Plenary Session at the G20 Summit on Financial Markets and the World Economy at the National Building Museum in Washington, November 15, 2008.Jason Reed</p>

WASHINGTON (Reuters) - World leaders on Saturday backed a rapid action plan for the global economic crisis, agreeing on the need for measures to spur growth, better financial market rules and more say for emerging countries.

"We are determined to enhance our cooperation and work together to restore global growth and achieve needed reforms in the world's financial systems," the leaders of more than 20 industrialized and developing nations said after a summit.

Government spending plans to boost growth are needed with "rapid effect", but they did not commit to a coordinated push, and differences were apparent over how to regulate the financial industry, in areas including hedge funds.

In one historic breakthrough, they agreed emerging market countries should have a voice in running the world economy. They will study ways of giving them more power at the International Monetary Fund.

Presidents and prime ministers from the powers of the 20th century for the first time in a G20 summit joined the leaders of new economic heavyweights such as export colossus China and oil-rich Saudi Arabia. They met in a Washington museum around a large map of the world, trying to highlight the global nature of their rescue plan.

U.S. President George W. Bush hailed the meeting he hosted as a success, saying leaders agreed to pro-growth policies.

"It makes sense to come out of here with a firm action plan, which we have, and it also makes sense to say to people that there is more work to be done, and there will be more meetings," Bush told reporters.

Signs are mounting of a painful economic slump in many regions, with the euro zone slipping into recession according to data last week, unemployment climbing in the United States and elsewhere and emerging economies slowing.

As the summit began, the International Monetary Fund agreed to a loan worth at least $7.6 billion as part of a bigger plan for Pakistan where foreign currency reserves have dwindled and the risk of a default on its debts has grown.

In another sign of the scope of the crisis, India on Saturday took the latest in a series of steps to improve money market liquidity and help exporters.

The G20 group of advanced and big developing economies also agreed on Saturday there should be no rise in protectionism in the face of the economic slump.

Bush and several other leaders said they would aim for a long-elusive breakthrough in the struggling Doha round of talks for a global trade deal before the end of the year.

BROADER RESPONSE NEEDED

<p>President George W. Bush makes a statement during a post-summit news conference at the G20 Summit on Financial Markets and the World Economy at the National Building Museum in Washington, November 15, 2008.Jim Young</p>

With Bush only two months away from leaving the White House and his successor Barack Obama choosing to stay away from the Washington meeting, talk of the summit launching a top-to-bottom overhaul of global finance had been tempered.

In their summit communique, the leaders said the worsening economy meant "a broader policy response is needed, based on closer macroeconomic cooperation," and they backed fiscal measures to boost growth without risking budget discipline.

They also stressed the importance of monetary policy "as deemed appropriate to domestic conditions."

Central banks around the world cut interest rates together in an unprecedented move in October as financial markets panicked about a global recession, but with U.S. rates already close to zero, the room for more coordinated cuts is limited.

The leaders pledged to "take whatever further actions are necessary to stabilize the financial system."

Slideshow (18 Images)

Many leaders came to Washington stressing the importance of more regulation to crack down on excesses in the financial sector. Huge risk-taking on house prices, especially in the United States, backfired last year and triggered the downturn.

"We pledge to ... ensure that all financial markets, products and participants are regulated or subject to oversight, as appropriate to their circumstances" the summit communique

said.

But an action plan also agreed on by leaders gave hedge funds and private equity firms an apparent exemption from tough new controls, saying they "should bring forward proposals for a set of unified best practices" for review by finance ministers.

Leaders are due to meet again before the end of April and they set their finance ministers a series of tasks to review accounting standards, colleges of supervisors for major global banks, standards for credit rating agencies and limits on pay.

French President Nicolas Sarkozy said the next meeting would probably take place in London as Britain assumes the presidency of the G20 next year.

That is when the world will see whether a newly installed President Obama will take a different approach to Bush on how to tackle the economic crisis, as well as other issues ranging from climate change to international trade.

"President Obama before being elected was in Europe and I remember what he said in Berlin. He said the world should be seen as one. He stated very clearly his commitment to a global approach to global problems," European Commission President Jose Manuel Barroso told reporters late on Friday.

"We need global responses to global problems," he said.

Writing by William Schomberg and Stella Dawson; Editing by Eric Walsh

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