G20 to pledge stimulus until economic recovery assured
G20 policymakers will this weekend promise to keep economic support packages in place until recovery is certain and seek to reassure financial markets they have credible plans to withdraw the stimulus when appropriate.
Finance ministers and central bankers from the Group of 20 developed and emerging nations are meeting in London on Friday and Saturday to discuss the next steps in fighting the worst financial crisis since the Great Depression.
Since their leaders last met in April when the world was in the midst of severe recession, prospects for the global economy look a lot better with stock markets rising since March and growth returning in a number of countries.
But policymakers are cautious about declaring victory just yet. They will stress policy needs to remain accommodative for now and also discuss putting curbs on bankers' pay, financial regulation and international institutional reform.
I believe we can be confident about our prospects for 2010. But there are still uncertainties and risks that we have to confront, British finance minister Alistair Darling, the meeting's host, said late on Thursday.
And the biggest risk is to think that the job's done -- that recovery is guaranteed. No country can be complacent -- we've got to see this through.
Still, with interest rates at record lows and trillions of dollars thrown into their economies to fight the crisis, policymakers will be keen to show they have coordinated exit strategies in place.
With rising unemployment likely to eat into their own poll ratings, they are also determined to have someone to blame and will stress that banks cannot return to business as normal.
France, Germany and Britain on Thursday put forward proposals to discourage banks from paying excessive bonuses that promoted risk-taking behavior that many say caused the crisis.
Ministers will discuss bank bonuses being deferred over time to discourage short-termism and be subjected to clawback in the event things turn bad. Concrete measures are expected by the time leaders meet in Pittsburgh later this month.
They will also 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.
U.S. Treasury Secretary Timothy Geithner is pressing the G20 to back tough new international standards for bank capital and liquidity. The U.S. Treasury said on Thursday a comprehensive agreement should be reached by the end of 2010, with countries implementing the standards by the end of 2012.
Other issues on the table for the G20 meeting are ensuring international institutions like the International Monetary Fund get the full resources promised to it at April's London summit, when the world was still in the grip of a major recession.
Dinner on Friday will discuss how the IMF and the World Bank can be reformed to reflect better the emergence of the new economic powers.
Representatives from Brazil, Russia, India and China will meet on the sidelines of the meeting and Geithner is expected to join them.
The voice of the BRICs has grown stronger, and proof of that is that U.S. finance minister Geithner has asked to come to the BRIC meeting and to discuss a range of issues, a Russian delegation source told reporters in London on Thursday.
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