Support builds for rebalancing world economy
Support grew on Tuesday for a U.S. plan to build a more balanced global economy and leaders warned against returning to business as usual once recovery takes hold.
British Prime Minister Gordon Brown said there was substantial support among the Group of 20 nations for creating a new framework aimed at shrinking surpluses in export-rich countries such as China and boosting savings in debt-laden nations including the United States.
But French Economy Minister Christine Lagarde said she feared growing signs of economic recovery could undermine commitments to rework and regulate the world financial order.
This meeting is a real challenge, she told a news conference. We are currently seeing, notably in the United States, sufficient signs of recovery that numerous players are saying ... let's go back to our old habits and carry on with our business as we did in the past.
The G20 club of rich and developing economies holds a leaders summit in Pittsburgh from Thursday, and the United States wants to see the rebalancing debate high on the agenda.
Also up for discussion are how to nurture an economic recovery, rein in risk-taking by banks and bankers, and save the planet from global warming.
This marks the third meeting in a year of a group of leaders that came together in the aftermath of the collapse of investment bank Lehman Brothers to find a way to end the worst global recession since the 1930s.
Now the G20 aims to figure out how to build a lasting recovery which is less prone to painful boom-bust cycles.
U.S. Treasury Secretary Timothy Geithner said the world's biggest economy was at the beginnings of a recovery, and the key was to ensure that the recovery was self-sustaining.
To make sure that as we recover from this crisis we are laying the seeds for a more balanced, more sustainable recovery: That is the agenda, Geithner said.
BROAD SUPPORT
Analysts said U.S. plans for a more balanced global economy could meet resistance from China, which is unlikely to agree to reforms that would threaten its growth.
But Britain's Brown, the current chairman of the G20 club, said there was broad support.
I have been talking to many countries in Asia, as well as in Europe, and I have been talking to President Obama and others, and I believe that there is support for that framework, he said.
We are looking at how we can put in place for the future the mechanism or path that can lead us to making decisions about better ways of creating growth.
A document outlining the U.S. position ahead of the September 24-25 summit said big exporters, which include China, Germany and Japan, should consume more, while debtors like the United States ought to boost savings.
Ouseme Mandeng, head of public sector investment advisory at Ashmore Investment Management in London, said the G20 must also address the sensitive issue of reforming the International Monetary Fund, to win full support from emerging economies.
They are the two sides of the same coin, he said. There are opportunities to present a new vision in the post-crisis world. I'm not sure if they have the courage to do so.
China and other fast-growing nations are clamoring for more say at the IMF and other international financing institutions.
The United States has backed a plan to shift 5 percent of voting power to certain emerging economies from rich nations.
However, Europe has yet to fully support that proposal and the emerging economies have pushed for a 7 percent shift.
CLIMATE AND CULTURE CHANGE
Curbing huge pay packages for bankers is high on Europe's to-do list for the summit.
At a meeting of G20 finance leaders in London this month there was general agreement on the need to change the risk-taking culture of banks to ensure that employees are not rewarded for making risky investments that later collapse.
G20 officials also concurred that there should be tighter restrictions on how much capital banks must hold to absorb losses when loans go bad, but offered no specifics.
On climate change, rifts remain between rich and developing economies over how quickly to cut carbon dioxide emissions and who should foot the bill. However, there were signs of progress on Tuesday as Chinese President Hu Jintao announced goals to slow growth in his country's emissions.
The G20 is under pressure to show progress before 190 nations gather in Copenhagen in December to try to reach a deal to slow climate change.
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