G20 finance ministers vowed Saturday to take "whatever action is necessary" on the world economic slowdown, after talks preparing for a key summit on fighting the crisis next month. They played down signs of division between the United States and Europe on how best to boost the global economy, insisting the road to the key summit of world leaders in London on April 2 was smooth.
"Were prepared to take whatever action is necessary to ensure growth is restored and were committed to do that for however long it takes," said British finance minister Alistair Darling, who hosted the talks. "I believe that this does provide a very clear sense of direction."
The politicians managed to reach agreement on the need for an "urgent" and substantial funding boost for the International Monetary Fund (IMF), although a communiqué issued afterwards did not put a figure on how much. They also agreed to tougher regulation of the financial system.
But the meeting failed to reach consensus on a new stimulus package, despite controversial calls from the US, the worlds largest economy, for co-ordinated international pump-priming in recent days. Nevertheless, US Treasury Secretary Timothy Geithner insisted there was unprecedented unity among the G20 on the economy, insisting: "The world is with us" when asked about stimulus.
"We are seeing the world move together at a speed and on a scale without precedent in modern times," he said. "We have a very broad basis consensus globally now on the need to act aggressively to restore growth."
Other measures agreed included regulatory oversight of all credit agencies, blamed for being too slow to alert investors to high-risk instruments, as well as a need for "sufficient supervision and regulation of hedge funds". The G20 also stated its key priority was restoring bank lending to help ease the effects of the crisis.
In addition, it pledged to "fight all forms of protectionism and maintain open trade" and stressed commitment to helping developing economies. Politicians from the United States, China and Japan plus wealthy European nations and emerging powers had held a day of talks to pave the way for the April 2 London G20 summit on tackling the downturn.
The run-up to Saturdays meeting was marked by splits between the US and Europe, particularly on whether to launch a new economic stimulus plan or concentrate on tightening market regulation to fight recession. But politicians both at the meeting and beyond played down talk of splits, insisting that clear agreements at the London meeting in around three weeks time were on the cards.
US President Barack Obama, who will attend the London summit in April, denied there were divisions on how to tackle the financial crisis. He rejected the idea that "somehow there are sides developing with respect to the G20" during a White House press conference.
British Prime Minister Gordon Brown, who will host the G20 summit, and German Chancellor Angela Merkel also talked up the prospect of agreement. "Im very positive, Im very optimistic that we will be able to... come to an agreement together with the United States, with emerging economies such as China and India," said Merkel after meeting Brown Saturday.
Brown, meanwhile, highlighted US support for changes in regulations for hedge funds and other "shadow banking" operations. Highly speculative and lightly regulated hedge funds have been blamed for fuelling instability in financial markets.
Countries like Germany and France are opposed to US calls for new stimulus, instead favouring tougher regulation to tackle the crisis. The United States, eurozone, Japan and Britain are all in recession as the global economy struggles to recover from the world-wide credit crunch that erupted in late 2007. Commercial banks are lending less cash amid fears about their exposure to the collapsed US subprime property market.
Extra funding for the IMF will protect its ability to go to the rescue of countries worst hit by the credit crunch, such as Pakistan and Hungary recently. Agreement on IMF funding came after the United States suggested this week that its lending capacity should be trebled to 750 billion dollars (580 billion euros). European leaders want to double the figure to 500 billion dollars.
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