LONDON — Anxiously assembled at the most perilous moment for the global economy since the Great Depression, the world’s financial powers pledged more than $1 trillion Thursday for emergency loans to contain the contagion. But they rebuffed President Barack Obama’s bid for new stimulus spending and made no guarantees of success.
“This was the day the world came together to fight back against global recession,” declared British Prime Minister Gordon Brown, the summit host, as he led a choreographed show of unity designed to boost confidence in homes and boardrooms everywhere.
“This is just the beginning,” added Obama.
No one promised an immediate impact, and all agreed that much remained to be done.
Besides promising $1.1 trillion for lending to less-well-off countries — an effort to erect an economic firewall and prop up remaining markets for bigger nations’ exports — the Group of 20 industrial and developing countries vowed major efforts to clean up banks’ tattered balance sheets and get credit flowing again, to shut down global tax havens, and to tighten regulation over hedge funds and other financial high- fliers in the U.S. and elsewhere.
But French President Nicolas Sarkozy and German Chancellor Angela Merkel failed to get the powerful “global regulator” they sought with authority across borders, an idea opposed by the United States. The leaders did agree to some expanded international oversight, including cracking down on hedge funds and tax havens.
Collectively, the measures were an attempt to free the clogged pipes of capitalism, so spending, lending, borrowing and manufacturing can expand instead of continuing to retreat.
European and U.S. markets surged ahead of the concluding summit communique, and Wall Street held most of its gains after the results were announced late Thursday.
Unlike previous Western-dominated summits, this gathering included China, India and other economic giants as well as rising powers. Said Brown: “I think the new world order is emerging and with it the foundations of a new and progressive era of international cooperation.”
Obama, in his first major venture into international diplomacy, failed to get U.S. trading partners to spend more money on job-creating stimulus programs, as the U.S. and Britain have done.
The proposal was opposed strongly by France and Germany.
“I think we did OK,” Obama told reporters afterward. “When I came here, it was with the intention of listening and learning, but also providing American leadership. And I think the document that has been produced as well as concrete actions reflect a range of our priorities.”
“In life there are no guarantees; in economics there are no guarantees,” he said.
In an effort to offset their inability to agree on the more divisive proposals, the G20 leaders outlined a raft of policies to rebuild trust in the financial system, including guidelines for new openness.
“The era of banking secrecy is over,” said a statement issued by the G20.
Participants sought to trumpet the achievements and not dwell on what they couldn’t accomplish. The summit partners renewed vows not to turn inward or pass protectionist policies.
In the boldest moves of the summit, G20 participants announced a tripling of loans available to the International Monetary Fund, to $750 billion, a $250 billion expansion in a special IMF fund to help members’ foreign exchange reserves, and $250 billion to the IMF to support trade. They also agreed to sell IMF-held gold to poor countries.
The G20 leaders also said that developing nations — hard-hit and long complaining of marginalization — should have a greater say in world economic affairs.
Steven Schrage, a former U.S. trade official who is now an international business analyst with the Washington-based Center for Strategic and International Studies, gave the G20 credit for bolstering the IMF but said much more needs to be done.
“Given the circumstances, they handled it well. But when you look at this global fire that continued to spread over the last five months, there’s still not a clear way forward on a lot of the critical challenges,” he said. “There’s still no real agreement on stimulus going forward.”
