Washington, September 20: A year after global finance imploded, US President Barack Obama hosts a G20 summit starting on Thursday aimed at tightening regulations to ensure such a calamity never happens again.
As countries claw back from recession, led by growth in Asia, the onus on leaders gathering in Pittsburgh is to decide when to pull the plug on state stimulus packages and how to coordinate that move.
Hosting his first major summit, Obama will be keen to avoid an embarrassing clash over banker bonuses as he seeks to trumpet his message that a second “Great Depression” has been avoided but harsh lessons must be learnt.
Since the US investment bank Lehman Brothers collapsed a year ago after suffering unsustainable subprime mortgage-related losses, trillions of dollars have been gobbled up worldwide in government bail-outs.
With Japan, France and Germany officially out of recession and the United States expected to follow this year, there is disagreement amongst world leaders over how best to proceed.
British Prime Minister Gordon Brown has urged trillions more dollars of state support over the coming year to restrain soaring unemployment. The Chinese however are worried about skyrocketing budget deficits, particularly in the United States.
Obama’s top summit negotiator, financial adviser Michael Froman, said that Washington would urge G20 leaders to resist the temptation to end stimulus efforts too early.
“Pittsburgh is not intended to be a victory lap,” Froman said. “We will be underscoring the need to remain vigilant, to avoid premature withdrawal of stimulus.”
Obama issued a stark warning to banks a week before the summit, saying they must not ignore the lessons of the crisis and calling on Wall Street to support the most ambitious financial overhaul since the 1940s.
“As the United States is aggressively reforming our regulatory system, we’re going to be working to ensure that the rest of the world does the same,” he said.
“We will not go back to the days of reckless behavior and unchecked excess at the heart of this crisis.”
The last G20 summit in April in London provided for stricter controls on bankers’ pay and bonuses, more regulation of hedge funds and ratings agencies, and sanctions against tax havens.
Anger has since swelled on the bonus issue, particularly in Europe, where French President Nicolas Sarkozy has led the charge to install mandatory caps — a proposal Obama strongly opposes.
“All over the world, people are sickened by the bonus system,” Sarkozy said recently, threatening to walk out of the G20 summit if action was not taken. “We want to bring to an end the scandal of bonuses. We want it to stop.”
European Union leaders meeting on Thursday vowed to unite behind a tough stand on bonuses in Pittsburgh, and also urged the G20 to force rich countries to give billions annually to help poor nations tackle climate change.
–Agencies