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June - July 2009
G20: THE LONDON SUMMIT BY RT. HON STEPHEN TIMMS MP FINANCIAL SECRETARY TO THE TREASURYIn preparation for the UK’s presidency of the G20, I visited a number of member countries – Korea, China, Brazil, Argentina, Indonesia and, to my great pleasure, India. On all of my visits I was struck by the willingness of national leaders to work together to overcome our common challenges.
We live in a highly globalised world; countries are interconnected by trade and technology to an extent that would have been unimaginable a few decades ago.
Globalisation has raised living standards around the world and lifted millions of people out of poverty; but it brings with it a set of new and difficult problems to be solved. It is clear, for example, that the national and international systems of regulation failed to adapt to a changing and increasingly complex financial system. We have seen too how economic shocks can be transmitted around the world at speed, with serious repercussions for people everywhere.
The events in the global economy in the past 18 months have underlined how co-dependant national economies are and have reinforced the importance of international co-operation to tackle current issues and ensure that the mistakes of the past cannot be repeated.
On 2nd April leaders from the world’s major economies and key international institutions met in London to agree on the collective action necessary to stabilise the world economy, secure recovery and protect jobs. The leaders arrived at the Summit faced by an unprecedented range of challenges – averting an even more severe downturn and restoring growth in the short term, while reshaping the financial system, preserving the world trading system, and laying the foundations for a sustainable recovery.
At the Summit, the leaders reaffirmed their commitment to work together to restore growth and jobs, while preserving long-term fiscal sustainability. They agreed actions to accelerate the return to global economic growth and called on the International Monetary Fund (IMF) to monitor progress. The leaders committed to make available an additional $1.1 trillion programme of support to help the world economy through the crisis and to restore credit, growth and jobs.
To help ensure that the problems that led to the global downturn cannot be repeated, the leaders agreed steps to put in place a more effective and credible system of surveillance and regulation to take account of systemic risks and prevent excess leveraging, including- for the first time- regulation and oversight of large hedge funds and credit rating agencies. They also agreed on actions to tackle non-cooperative jurisdictions and common principles for executive remuneration to ensure rewards for long-term value creation rather than excessive risk-taking.
Countries agreed to make an additional $850 billion available through international financial institutions like the IMF, World Bank, and other multilateral development banks, and agreed to ensure that these institutions have the facilities needed to meet the needs of emerging markets and developing countries. It is clear that reform of these institutions is a priority and the leaders agreed to ensure that national representation is in line with the changing balance of the world economy.
We also saw clear commitments not to resort to economic protectionism and to put in place a transparent mechanism to monitor protectionist actions. Measures were agreed which were to promote trade, including a commitment to make available $250 billion to halt the slow-down in trade finance, which facilitates up to 90% of world trade.
It is clear that the impact of the global economic downturn will hit hardest on the poorest. An estimated 2.8 million children could die as a result of the current economic problems. So the leaders reaffirmed their commitment to meet the Millennium Development Goals and to deliver on development aid pledges. They made $50 billion available to low income countries and called on the UN to establish an effective mechanism to monitor the impact of the crisis on the poorest and most vulnerable.
We are under no illusions. The world’s problems cannot be solved at a single day’s meeting of global leaders. But the London Summit was an important step in the journey towards restored economic growth and the spread of prosperity. I look forward to working with our G20 partners over the coming months as we tackle this global crisis together.