G20 strikes trillion-dollar crisis deal
03 April, 2009
LONDON: World leaders committed new resources of $1.1 trillion on Thursday to combat the deepest economic downturn since the Great Depression, available to the world economy through the International Monetary Fund (IMF) and other institutions.
At a G20 summit, they also pledged to lay out a $5 trillion stimulus spending by the end of 2010 and signed off on plans to commission blacklists of tax havens and tighten financial rules to bring hedge funds and credit rating agencies under closer supervision.
“This is the day that the world came together, to fight back against the global recession. Not with words but a plan for global recovery and for reform and with a clear timetable,” British Prime Minister Gordon Brown, the summit host, said. “A new world order is emerging, and with it we are entering into a new era of international cooperation.”
The package includes $250 billion of IMF reserve units called Special Drawing Rights. “This is available to all IMF members,” Brown said. In addition, the IMF would see its own resources tripled, with up to $500 billion of new funds, of which $40 billion would come from China.
Markets reacted positively. The index of top European shares was up 5 percent after Japan’s Nikkei gained 4.4 percent. On Wall Street, the Nasdaq was up 4 percent and the Dow Jones 3.6 percent. The price of oil jumped above $52.
Brown said that while there were “no quick fixes”, the decisions meant that “we can shorten the recession and we can save jobs.” The final communique forecast the measures taken would raise world output by four percent by the end of next year.
French President Nicolas Sarkozy – who had threatened to walk out at one point – said the results were beyond what could have been imagined.
Germany’s finance minister welcomed the fact that no obligation was agreed for countries to adopt further stimulus packages. The issue had created tension in the summit build-up, with Washington favouring such packages and Paris and Berlin preferring to let earlier measures take their course.
Addressing a key demand from France and Germany, Brown said the leaders agreed “there will be an end to tax havens that do not transfer information on request. The banking secrecy of the past must come to an end”.
Talks on the eve of the London summit were clouded by anti-capitalist protests which turned violent.
Police threw up a ring of steel around the Excel Conference centre in London’s Docklands district — near the headquarters of many banks blamed for the international crisis..
Small pockets of demonstrators built up around the summit and in the main financial district, the day after thousands laid siege to the Bank of England and attacked a branch of Royal Bank of Scotland.
One man died after collapsing during the protests. Police said bottles and other missiles were hurled at them as they tried to resuscitate the man.