The global economic crisis is not over and unemployment will still go up in the months to come, the leaders of Britain, France and Germany warned on Thursday before a meeting of G20 policymakers in London this weekend. In a letter to their European Union colleagues, the leaders of Europe's three biggest economies said there was no alternative to keeping the extraordinary stimulus in place for now but plans should be made for its co-ordinated withdrawal.
"We must be careful to avoid laying the foundations of new global imbalances," wrote British Prime Minister Gordon Brown, President Nicolas Sarkozy and German Chancellor Angela Merkel. "Therefore we should work on exit strategies to be implemented in a co-ordinated manner as soon as the crisis has ended."
With public anger at financial sector excess still high at a time when job losses look set to climb further, the leaders also said that banks could not just go back to business as normal and would have to rein in their risk-taking and bonus culture.
A G20 leaders' summit in Pittsburgh on September 24-25, they wrote, should also deliver binding rules on limiting excessive bonuses though there was no explicit mention of any kind of extra tax that has been mooted previously by the French. "Our citizens are deeply shocked at the revival of reprehensible practices, despite taxpayers' money having been mobilised to support the financial sector at the height of the crisis," the letter said.
They said bonuses at banks should be deferred over times to discourage short-termism and be subjected to clawback in the event of things turning bad. They also called on their finance ministers, meeting in London, to look at enhanced regulation of systemically important banks and ways in which these institutions can be wound up if needed without shaking the financial system.
The United States had much the same message. "We've come a very long way. We have a very long way to go still," US Treasury Secretary Timothy Geithner said late on Wednesday. He will be flying to London for a finance ministers' meeting hosted by Britain's Alistair Darling on Friday and Saturday that will lay the groundwork for the Pittsburgh summit. Other areas of discussion will be making sure international institutions like the International Monetary Fund get the full resources promised to it at April's London G20 summit, when the world was still in the grip of a major recession.