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G20 pledges 5 trillion dollars war chest for crisi

Posted on: April 4, 2009

AFP – Friday, April 3

LONDON (AFP) – – World leaders pledged a huge raft of new spending Thursday that they said will take their outlay in the battle against the economic crisis to five trillion dollars by the end of next year.

More than one trillion dollars will go to the International Monetary Fund and other institutions while the Group of 20 summit also ordered a crackdown on tax havens and excessive corporate pay, a new free trade push and the sale of IMF gold reserves to help poor countries.

“A new world order is emerging, and with it we are entering into a new era of international cooperation,” British Prime Minister Gordon Brown said after a tense summit which brought together US President Barack Obama and leaders of the established and emerging powers from around the world.

The United States will have to make the biggest contribution to the initiative but Obama called the meeting a “turning point” in the battle against the crisis.

The G20 leaders had agreed “an unprecedented set of comprehensive and coordinated actions,” the US president said after the summit.

Stock markets shot up in response to the summit, Wall Street’s Dow Jones Industrial Average rose 3.45 percent and London’s FTSE 100 index closed up 4.28 percent.

Even French President Nicolas Sarkozy, who had threatened to walk out of the summit, said the results were “more than we could have hoped for”. German Chancellor Angela Merkel said a “historic compromise” had been made.

Before the summit, the United States and Britain had pushed for bigger stimulus spending while France and Germany had called for the focus to be put on greater regulation of the financial sector.

But Brown trumpeted an agreement that he said benefited every country.

The summit provided 1.1 trillion dollars of new resources for the IMF and other global finance bodies.

There will be 500 billion dollars of new funding, 250 billion dollars and 250 billion dollars in trade credit.

The British leader said the Organisation for Economic Cooperation and Development would publish a list of “non-compliant” tax havens which face immediate action “and we have agreed tough standards and sanctions for use against those who don’t come into line in the future.”

Brown said there would also be new rules on corporate bonuses to discourage bankers who take short term risks.

The new Financial Stability Bureau will “implement new rules on pay and bonuses on a global level so that there are no more rewards for failure. We want to impose corporate responsibility on every part of the world.”

They also ordered the IMF to sell billions of dollars of gold reserves to help the world’s poor countries, Brown said.

Brown said the IMF and World Bank would undergo major reforms to reflect changes in the power structure of the world economy which have seen the rise of China, India, Brazil, South Africa and other new powers.

Brown struck a note of caution, however.

“Today’s decisions, of course, will not immediately solve the crisis. But we have begun the process by which it will be solved,” he said.

“Today the largest countries of the world have agreed a global plan for recovery and reform. We have resolved that from today we will together manage the process of globalisation.”

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.

UN Secretary General Ban Ki-moon warned in an article for Britain’s Guardian newspaper that more than economics was at stake in London.

He said that unless decisive action was taken, the crisis could lead to a “growing social unrest, weakened governments and angry publics who have lost all faith in their leaders and their own future.”

But analysts and aid groups were not so impressed.

Howard Wheeldon, senior strategist at BGC Brokers, lamented that the package might only help prevent a deeper depression.

The G20 statement was “nothing that really softens the blow of recession — but perhaps some things that stop it moving to depression,” said Wheeldon.


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