Key achievements ahead of the London Summit
The objective of the London Summit is to bring the world's biggest economies together to help restore global economic growth through enhanced international coordination. To achieve this requires three commitments by world leaders:
- First, to take whatever action is necessary to stabilise financial markets and enable families and businesses to get through the recession.
- Second, to reform and strengthen the global financial and economic system in order to restore confidence and trust.
- Third, to put the global economy on track for sustainable growth, high levels of employment and poverty reduction.
In the four months since the Washington Summit, international events such as the World Economic Forum in Davos have provided forums for discussion of possible solutions to the global economic crisis. Countries and regional groups from around the world have also been working closely together to find practical policies to meet all three commitments. Several governments – including Spain and Russia – have set out their own agendas following publication by the UK of its plan for recovery – The Road to the London Summit.
In the run-up to the London Summit, several preparatory meetings have made considerable progress in reaching agreement on some of the key issues. At the recent meeting of G20 Finance Ministers and Central Bank Governors, the following were agreed:
- A commitment to fight all forms of protectionism and maintain open trade
- A pledge to deliver the scale of sustained effort necessary to restore growth
- A promise that central banks will maintain expansionary policies as long as is needed
- A recognition of the urgent need to increase the resources of the International Monetary Fund
- Action to restore bank lending through measures such as liquidity support, recapitalisation and dealing with impaired assets
- Appropriate regulation and oversight of all systemically important financial institutions, markets and instruments – and registration of hedge funds or their managers
- Stronger regulation reinforced by macro-prudential oversight to prevent the build-up of systemic risk
- Changes to international banking regulations to ensure they dampen rather than amplify economic cycles
- Supervisory colleges, with strengthened international cooperation to prevent and resolve crises
- Regulatory oversight of all credit rating agencies whose ratings are used for regulatory purposes
- Identification of non-cooperative jurisdictions – and a tool-box of effective counter-measures
- Sound practice principles for compensation
- Enhancement of the governance of international financial institutions to strengthen their effectiveness and legitimacy - including open, merit-based selection processes for their heads.
Ahead of the G20 preparatory meeting, the Financial Stability Forum agreed to increase its membership to include all the G20 countries, in order to enhance its ability to contribute to improving the international financial system. At the same meeting in London, the FSF also agreed on action to improve banking regulation, get rid of bankers' bonuses that encourage excessive risk-taking and strengthen cross-border crisis management.
A number of countries have also taken independent policy that helps to deliver London Summit aims. These actions include:
- banking recapitalisation - for example the US has injected $236bn into banks
- fiscal stimulus policies - the IMF estimates that China's discretionary measures amount to 2 per cent of GDP this year
- expansionary monetary policy - for example, the ECB has significantly lowered the benchmark interest rate to 1.5 per cent, a record low.
Japan has agreed to lend the IMF $100m, even before agreement is reached on a figure for the increase in its resources. Europe’s leaders agreed to provide an extra €75bn to the IMF at the meeting of the European Council on 19th and 20th March. The IMF has approved an overhaul of its lending framework that should make it easier and more attractive for emerging market economies to seek the Fund’s support during the global crisis. Switzerland, Austria and Luxembourg have followed Hong Kong, Singapore, Andorra and Liechtenstein in taking steps to improve the exchange of tax information with other countries in line with international standards drawn up by the Organisation for Economic Cooperation and Development.
Others will follow suit in the days ahead, as the final measures needed to complete the global deal to be reached in London on 2nd April are agreed.
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Get updated on the issues in the run up to the London Summit with these excerpts from debates around the world.