LONDON (Reuters) - The World Bank announced a $50 billion program on Tuesday to counter a decline in global trade and Britain called on G20 leaders to supply “the oxygen of confidence” to drag the world economy out of recession.
Leaders of the world’s largest and developing economies meet in London on Wednesday and Thursday to try to chart a way out of the worst global crisis since the 1930s, caused by a freeze in credit after bank loans went bad.
The scale of the problem was underlined by the Organization for Economic Co-operation and Development (OECD), which said the economies of its 30 members would shrink by 4.3 percent in 2009, shedding 25 million jobs this year and next.
Japan, the world’s second largest economy, announced plans for its third stimulus package and Japanese media predicted it would aim to create 60 trillion yen ($612 billion) worth of demand and 2 million jobs.
British Prime Minister Gordon Brown, the summit host, said leaders should aim to save or create 20 million jobs and must act together to increase the potential impact of their actions.
“Leaders meeting in London must supply the oxygen of confidence to today’s global economy and give people in all of our countries renewed hope for the future,” he said.
The run-up to the summit has been marked by divisions between the United States and continental Europe over its focus, and skeptics have questioned how much it can achieve.
The Americans want more spending, while the Europeans are focused more on regulation, arguing stimulus measures already taken need to be given time to work.
RECOVERY NEXT YEAR
The OECD forecast a recovery in 2010, echoing a line in a draft G20 communique obtained by Reuters.
The draft shows leaders want to agree to avoid currency moves and protectionist measures that would damage other economies. It also repeats existing promises to get economies back on track, but does not contain any specific details.
The G20 is expected to announce at least a doubling of resources for the International Monetary Fund from the current $250 billion -- although Australian Prime Minister Kevin Rudd said its funding should be tripled if necessary, stressing the threat to emerging economies.
“The first major risk comes from a potential economic collapse of emerging markets,” he said. “The second major risk to global recovery is the process of deleveraging.”
Speaking at a Thomson Reuters event, World Bank President Robert Zoellick announced measures to reverse a sharp drop in trade flows after credit dried up.
Zoellick said the program would include funding from governments, starting with contributions from Britain and the Netherlands, regional development banks and private-sector banks such as Standard Chartered, Standard Bank and Rabobank.
The White House said it expected G20 leaders to agree on a package of financial reforms that could include expanded regulation of hedge funds and steps aimed at clamping down further on tax havens.
That chimed with a report released by a G20 working group on restructuring the financial services industry. It said hedge funds should be more closely regulated and credit ratings agencies subject to tighter supervision.
European Commission President Jose Manuel Barroso said the summit should pledge an overhaul of financial institutions, map out an exit from governments’ spending sprees and commit to a climate deal.
Brown, who has spearheaded efforts to get agreement on concrete measures at the G20, said the summit must restore people’s faith in the economy.
The son of a Scottish church minister, he told faith leaders and charity workers in a speech in London’s St Paul’s Cathedral that markets must be guided by everyday values cherished by all.
“Our task today is to bring the imperatives served by our financial markets into proper alignment with the values held by families and business people across our country - hard work, taking responsibility, being honest, being fair,” Brown said.
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