The Group of 20 (G20) bloc has been credited with helping the world avoid a second Great Depression. Now, the G20, which brings together advanced and emerging powers that comprise about four-fifths of the global economy, has been assured its place as the key international forum for economic decisions in future.
The decision, announced Friday at the start of the G20's latest summit in Pittsburgh, Pennsylvania, represents a major breakthrough for emerging powers like China, India and Brazil, who long complained of being shut out of the most important decisions on the direction of the global economy.
Developing countries were given a further victory with a promise of a greater voice in the International Monetary Fund and World Bank. The G20 reached a tentative deal to shift voting shares in their direction by 5 per cent by 2011.
Leaders agreed to make the G20 the "premier forum" for economic co-operation. Chinese President Hu Jintao said leaders should "make full use of the G20 platform" to address the toughest economic challenges.
The White House called it an "historic agreement." Until last year, the toughest decisions were taken by the Group of Seven (G7), which included the largest developed countries: Britain, Canada, France, Germany, Italy, Japan and the United States.
Formed in 1975, the G7 expanded its deliberations in the 1990s to include Russia to meet as the Group of Eight (G8). That club of world powers looked increasingly antiquated a year ago, after the collapse of US investment bank Lehman Brothers and a near-meltdown on Wall Street plunged the global economy into crisis, as credit markets froze, foreign investment flows dried up and trade contracted sharply.
Developing countries complained that, as they were affected by a crisis not of their making, they should have a say in the rescue plans and efforts to prevent a similar crisis from happening in future.
China, India and Brazil have actually propped up global growth over the year, as their economies have held up much better than industrial nations in Europe and the United States.
The rise of the G20 is a clear sign that their new economic power is here to stay. Next year's G20 summits are to take place in Canada and South Korea, the latter another sign of the growing voice of Asian nations.
Yet Friday's announcement is less a sign of their diplomatic clout: the G20 will not be a forum for security issues, as are the G7 and G8. David Schorr, head of US-based think-tank the Stanley Foundation, called it a "major step" for emerging countries but said the goal is now to broaden the focus beyond economic issues. "The step towards a large group is taking place on just one part of the international agenda," he said.
That dilemma was highlighted Friday, as the G20 summit was overshadowed by Iran's admission that it had developed a second nuclear production facility.
Obama, together with French President Nicolas Sarkozy and British Prime Minister Gordon Brown, condemned the revelation. But the issue was not to be part of the G20's final communique. Transition is never easy: Efforts by emerging countries to have more say in international financial institutions have been blocked primarily by Europe, which has a strong voice.
Obama was forced to engage in "shuttle diplomacy" between emerging economies and European powers in order to get the tentative agreement outlined Friday, according to Mike Froman, one of Obama's top economic advisers. Exactly how the countries will get more voting shares must still be hammered out between now and 2011.
Brazilian President Luiz Inacio Lula da Silva said he believed emerging powers were making progress and finding their voices since the first G20 summit in November in Washington.
"This meeting maybe was the most important G20 meeting we had until now," Lula said. "Today, I believe that G20 consolidated itself definitely as the institutional forum to take care of economic issues."