G-20 Leaders’ Summit
(To Boost up Financial Markets and the World Economy)
The G-20 Leaders’ Summit on Financial Markets and the World Economy was held in London on 2 April 2009. It followed the first G-20 Leaders Summit on Financial Markets and the World Economy, which was held in Washington, D.C. on 14–15 November 2008. Heads of government or heads of state from the Group of Twenty Finance Ministers and Central Bank Governors (G-20), plus some regional and international organisations attended. Due to the extended membership it has been referred to as the London Summit. The policing tactics at the event raised some controversy.G-20 leaders began gathering in London on 1 April 2009. Copyright © 2009 WWW.UPSC
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Before leaving for the London Summit, French President Nicolas Sarkozy suggested that if a meaningful deal was not agreed France would walk out of the summit echoing the “empty chair” gesture of then-French President Charles de Gaulle in 1965. Brown and Obama said that suggestions of a rift were exaggerated. Sarkozy attended a separate press conference with Merkel in which both repeated calls for the summit to agree on more stringent regulation of financial markets and restated their firm opposition to further financial stimulus packages.
Summit Declaration:
Before leaving for the London Summit, French President Nicolas Sarkozy suggested that if a meaningful deal was not agreed France would walk out of the summit echoing the “empty chair” gesture of then-French President Charles de Gaulle in 1965. Brown and Obama said that suggestions of a rift were exaggerated. Sarkozy attended a separate press conference with Merkel in which both repeated calls for the summit to agree on more stringent regulation of financial markets and restated their firm opposition to further financial stimulus packages.
Summit Declaration:
After end of summit a major declaration has been presented. Following points are According to declaration:
- Because it is the greatest challenge to the world economy in modern times; a crisis which has deepened, which affects the lives of women, men, and children in every country, and which all countries must join together to resolve. A global crisis requires a global solution.
- Prosperity is indivisible; that growth, to be sustained, has to be shared; and global plan for recovery must have at its heart the needs and jobs of hard-working families, not just in developed countries but in emerging markets and the poorest countries of the world too; and must reflect the interests, not just of today’s population, but of future generations too. the only sure foundation for sustainable globalisation and rising prosperity for all is an open world economy based on market principles, effective regulation, and strong global institutions.
- The agreements to treble resources available to the IMF to $750 billion, to support a new SDR [IMF special drawing rights] allocation of $250 billion, to support at least $100 billion of additional lending by the MDBs [Multilateral Development Banks], to ensure $250 billion of support for trade finance, and to use the additional resources from agreed IMF gold sales for concessional finance for the poorest countries, constitute an additional $1.1 trillion programme of support to restore credit, growth and jobs in the world economy. Together with the measures have each taken nationally, this constitutes a global plan for recovery on an unprecedented scale.
- To establish a new Financial Stability Board (FSB) with a strengthened mandate, as a successor to the Financial Stability Forum (FSF), including all G20 countries, FSF members, Spain, and the European Commission. The FSB should collaborate with the IMF to provide early warning of macroeconomic and financial risks and the actions needed to address them; Copyright © 2009 WWW.UPSCPORTAL.COM
- Members were agreed to increase the resources available to the IMF through immediate financing from members of $250 billion, subsequently incorporated into an expanded and more flexible New Arrangements to Borrow, increased by up to $500 billion, and to consider market borrowing if necessary.
- Member countries are undertaking an unprecedented and concerted fiscal expansion, which will save or create millions of jobs which would otherwise have been destroyed, and that will, by the end of next year, amount to $5 trillion, raise output by 4 per cent, and accelerate the transition to a green economy. Mebers are committed to deliver the scale of sustained fiscal effort necessary to restore growth.
- Central banks have also taken exceptional action. Interest rates have been cut aggressively in most countries, and central banks have pledged to maintain expansionary policies for as long as needed and to use the full range of monetary policy instruments, including unconventional instruments, consistent with price stability.
- In addition to reforming international financial institutions for the new challenges of globalisation members agreed on the desirability of a new global consensus on the key values and principles that will promote sustainable economic activity. We support discussion on such a charter for sustainable economic activity with a view to further discussion at our next meeting. We take note of the work started in other fora in this regard and look forward to further discussion of this charter for sustainable economic activity.
- Members reaffirm their historic commitment to meeting the Millennium Development Goals and to achieving our respective ODA [Overseas Development Agencies] pledges, including commitments on Aid for Trade, debt relief, and the Gleneagles commitments, especially to sub-Saharan Africa.
- The actions and decisions have taken will provide $50 billion to support social protection, boost trade and safeguard development in low income countries, as part of the significant increase in crisis support for these and other developing countries and emerging markets. Copyright © 2009 WWW.UPSCPORTAL.COM
Revolutionary Step:
The IMF wants to use this money to offer a new kind of loan that would be preventative. Rather than waiting for countries to get into financial difficulties, it would offer them a line of credit to help them defend their currencies in advance. In the past, countries were reluctant to ask for such money, as the financial markets got worried that they were in trouble. But Mexico has become the first country to ask for such a facility and there now seems to be less stigma about this approach. Much of the new IMF funds would be used in this facility, which would mainly be directed to the middle income countries who had relatively sound economies.
But in an even more radical step, the G20 leaders appear to have agreed to increase another type of IMF funds, the quotas owned by individual countries, by an additional $250bn. This would be done by creating more of its own currency, the SDR or special drawing right, which is a basket of currencies including the US dollar, the yen and the euro. This would give countries essentially free money, which they could use as they wish without having to negotiate deals with the IMF, and would do much to boost confidence among poorer countries.
Many of them have been critical of the harsh conditions imposed by the IMF before they are given help. In the past, such moves have always been resisted by Germany, on the grounds that creating money is inflationary. But in the current deflationary climate, they appear to have lifted their objections.
Reform Looms:
The IMF is also set to have a bigger role in preventing future crises, by developing an early warning system for financial problems, and taking a larger role in looking at the problems of the financial sector as a whole, in conjunction with a new global regulator, the Financial Services Board. But the biggest changes in the IMF will come after 2011, when it has been agreed that there will be a review of the voting structure. Copyright © 2009 WWW.UPSCPORTAL.COM
That could lead to the US losing its veto power, while China and other emerging countries get a bigger voice. It has already been agreed that in future, the convention that the World Bank and IMF must be headed by an American and a European respectively will be abandoned.
In return, China will be asked to lend some of its reserves to the IMF - and will continue to push for the idea that the SDR will become a real reserve currency, ultimately replacing the dollar. The changes to the resources and the role of the IMF are historic and perhaps the most important outcome of the G20 summit. But it must be borne in mind that providing more resources for the IMF can be only a short-term solution to the immediate crisis now engulfing developing countries. It is no substitute for a fiscal stimulus, as the money is loaned and must be paid back. Nor will it counter the need for additional development aid to counteract poverty. But it is a move towards a more global system of international finance.
Agenda of Summit:
The British Treasury, as hosts, produced an extended agenda pamphlet proposing the issues to be covered at the London Summit.
1. Coordinated macro-economic actions to revive the global economy, stimulate growth and employment – review measures taken and possible further steps
2. Reform and improve financial sector & systems – continue to deliver progress on the Washington Summit action plan
3. Reform international financial institutions – the International Monetary Fund (IMF), the Financial Stability Forum (FSF) and the World Bank.
The IMF wants to use this money to offer a new kind of loan that would be preventative. Rather than waiting for countries to get into financial difficulties, it would offer them a line of credit to help them defend their currencies in advance. In the past, countries were reluctant to ask for such money, as the financial markets got worried that they were in trouble. But Mexico has become the first country to ask for such a facility and there now seems to be less stigma about this approach. Much of the new IMF funds would be used in this facility, which would mainly be directed to the middle income countries who had relatively sound economies.
But in an even more radical step, the G20 leaders appear to have agreed to increase another type of IMF funds, the quotas owned by individual countries, by an additional $250bn. This would be done by creating more of its own currency, the SDR or special drawing right, which is a basket of currencies including the US dollar, the yen and the euro. This would give countries essentially free money, which they could use as they wish without having to negotiate deals with the IMF, and would do much to boost confidence among poorer countries.
Many of them have been critical of the harsh conditions imposed by the IMF before they are given help. In the past, such moves have always been resisted by Germany, on the grounds that creating money is inflationary. But in the current deflationary climate, they appear to have lifted their objections.
Reform Looms:
The IMF is also set to have a bigger role in preventing future crises, by developing an early warning system for financial problems, and taking a larger role in looking at the problems of the financial sector as a whole, in conjunction with a new global regulator, the Financial Services Board. But the biggest changes in the IMF will come after 2011, when it has been agreed that there will be a review of the voting structure. Copyright © 2009 WWW.UPSCPORTAL.COM
That could lead to the US losing its veto power, while China and other emerging countries get a bigger voice. It has already been agreed that in future, the convention that the World Bank and IMF must be headed by an American and a European respectively will be abandoned.
In return, China will be asked to lend some of its reserves to the IMF - and will continue to push for the idea that the SDR will become a real reserve currency, ultimately replacing the dollar. The changes to the resources and the role of the IMF are historic and perhaps the most important outcome of the G20 summit. But it must be borne in mind that providing more resources for the IMF can be only a short-term solution to the immediate crisis now engulfing developing countries. It is no substitute for a fiscal stimulus, as the money is loaned and must be paid back. Nor will it counter the need for additional development aid to counteract poverty. But it is a move towards a more global system of international finance.
Agenda of Summit:
The British Treasury, as hosts, produced an extended agenda pamphlet proposing the issues to be covered at the London Summit.
1. Coordinated macro-economic actions to revive the global economy, stimulate growth and employment – review measures taken and possible further steps
2. Reform and improve financial sector & systems – continue to deliver progress on the Washington Summit action plan
3. Reform international financial institutions – the International Monetary Fund (IMF), the Financial Stability Forum (FSF) and the World Bank.
Important steps to reconstruct and boost up World Economy :-Copyright © 2009 WWW.UPSCPORTAL.COM
- Restore confidence, growth, and jobs;
- Repair the financial system to restore lending;
- Strengthen financial regulation to rebuild trust;
- Fund and reform our international financial institutions to overcome this crisis and prevent future ones;
- Promote global trade and investment and reject protectionism, to underpin prosperity; and
- Build an inclusive, green, and sustainable recovery.
G20 Agreement
FINANCIAL REGULATION:Copyright © 2009 WWW.UPSCPORTAL.COM
- A new Financial Stability Board, with a strengthened mandate, will replace the Financial Stability Forum
- Financial regulation and oversight will be extended to all financial institutions, instruments and markets
- This includes bringing hedge funds within the global regulatory net for the first time
- Members are committed to implementing tough new rules on pay and bonuses at a global level
- International accounting standards will be set
- Credit rating agencies will be regulated in order to remove their conflicts of interest
- A common approach to cleaning up banks’ toxic assets has been agreed
TAX HAVENS:
- There will be sanctions against tax havens that do not transfer information on request
- The Organisation for Economic Co-operation and Development has published a list of countries assessed by the Global Forum against the international standard for exchange of tax information
IMF:
- Resources available to the International Monetary Fund will be trebled to $750bn
- This includes a new overdraft facility, or special drawing rights allocation, of $250bn
- Additional resources of $6bn from agreed IMF gold sales will be made available for lending to the poorest countries
- The G20 also supports increased lending to the world’s poorest countries of at least $100bn by the multilateral development banks
Copyright © 2009 WWW.UPSCPORTAL.COM
GLOBAL TRADE:
GLOBAL TRADE:
- There will be a commitment of $250bn of support for trade finance made over the next two years
- This will be made available through export credit and investment agencies, as well as through multilateral development banks
- National regulators will be asked to make use of available flexibility in capital requirements for trade finance
PROTECTIONISM:
- The G20 has pledged to resist protectionism
- There will be a commitment to naming and shaming countries that breach free trade rules
- The G20 will notify the World Trade Organization (WTO) of any measures that constrain worldwide capital flows
- The G20 has called on the WTO to monitor and report publicly on these undertakings on a quarterly basis
FISCAL STIMULUS:
- Although there is no new fiscal stimulus, Gordon Brown said G20 countries are already implementing “the biggest macroeconomic stimulus the world has ever seen” - an injection of $5tn by the end of next year.
WHAT IS G-20
The G-20 (more formally, the Group of Twenty Finance Ministers and Central Bank Governors) is a group of finance ministers and central bank governors from 20 economies: 19 of the world's largest national economies, plus the European Union (EU). It also met twice at heads-of-government level, in November 2008 and again in April 2009. Collectively, the G-20 economies comprise 85%of global gross national product, 80% of world trade (including EU intra-trade) and two-thirds of the world population.
Copyright © 2009 WWW.UPSCPORTAL.COM
The G-20 is a forum for cooperation and consultation on matters pertaining to the international financial system. It studies, reviews, and promotes discussion among key industrial and emerging market countries of policy issues pertaining to the promotion of international financial stability, and seeks to address issues that go beyond the responsibilities of any one organization.The G-20 operates without a permanent secretariat or staff.
The chair rotates annually among the members and is selected from a different regional grouping of countries. The chair is part of a revolving three-member management group of past, present and future chairs referred to as the Troika. The incumbent chair establishes a temporary secretariat for the duration of its term, which coordinates the group's work and organizes its meetings. The role of the Troika is to ensure continuity in the G-20's work and management across host years.
Copyright © 2009 WWW.UPSCPORTAL.COM
The G-20 is a forum for cooperation and consultation on matters pertaining to the international financial system. It studies, reviews, and promotes discussion among key industrial and emerging market countries of policy issues pertaining to the promotion of international financial stability, and seeks to address issues that go beyond the responsibilities of any one organization.The G-20 operates without a permanent secretariat or staff.
The chair rotates annually among the members and is selected from a different regional grouping of countries. The chair is part of a revolving three-member management group of past, present and future chairs referred to as the Troika. The incumbent chair establishes a temporary secretariat for the duration of its term, which coordinates the group's work and organizes its meetings. The role of the Troika is to ensure continuity in the G-20's work and management across host years.
Members of G-20
In 2009, there are 20 members of the G-20. These include the finance ministers and central bank governors of 19 countries and The 20th member is the European Union, which is represented by the rotating Council presidency and the European Central Bank List of 19 countries are following:-
| Argentina | Japan |
| Australia | Mexico |
| Brazil | Russia |
| Canada | Saudi Arabia |
| China | South Africa |
| France | South Korea |
| Germany | Turkey |
| India | United Kingdom |
| Indonesia | United States |
In addition to these 20 members, the following forums and institutions, as represented by their respective chief executive officers, participate in meetings of the G-20.
- International Monetary Fund
- World Bank
- International Monetary and Financial Committee Development Committee of the IMF and World Bank
Copyright © 2009 WWW.UPSCPORTAL.COM
The membership of the G-20 comprises:
The finance ministers and central bank governors of the G7, 12 other key countries, and the European Union Presidency (if not a G7 member)
The membership of the G-20 comprises:
The finance ministers and central bank governors of the G7, 12 other key countries, and the European Union Presidency (if not a G7 member)
- The European Central Bank
- The Managing Director of the International Monetary Fund
- The Chairman of the IMFC
- The President of the World Bank
- The Chairman of the Development Committee
Background of G-20:
The G-20, which superseded the G33, which had itself superseded the G22, was foreshadowed at the Cologne Summit of the G7 in June 1999, but was formally established at the G7 Finance Ministers' meeting on September 26, 1999. The inaugural meeting took place on December 15-16, 1999 in Berlin. In 2008 Spain and The Netherlands were included by French invitation for the G-20 Leaders Summit on Financial Markets and the World Economy and then were admitted as members de facto by the UK.
G20 Leaders Summit on Financial Markets and the World Economy was held in Washington on November 2009.In 2006 the theme of the G-20 meeting was “Building and Sustaining Prosperity”. The issues discussed included domestic reforms to achieve “sustained growth”, global energy and resource commodity markets, ‘reform’ of the World Bank and IMF, and the impact of demographic changes due to an aging population.
Trevor A. Manuel, MP, Minister of Finance, Republic of South Africa, was the chairperson of the G-20 when South Africa hosted the Secretariat in 2007. Guido Mantega, Minister of Finance, Brazil, was the chairperson of the G-20 in 2008; Brazil proposed dialogue on competition in financial markets, clean energy and economic development and fiscal elements of growth and development. In a statement following a meeting of G7 finance ministers on October 11, 2008, U.S. President George W. Bush stated that the next meeting of the G-20 would be important in finding solutions to the (then called) economic crisis of 2008.
An initiative by French President Nicolas Sarkozy and British Prime Minister Gordon Brown led to a special meeting of the G-20, a G-20 Leaders Summit on Financial Markets and the World Economy, on November 15, 2008. G20 leaders met again in London on 2 April 2009. Another G20 summit is scheduled to be held in New York City in September 2009.
G-20 Vs G20 Developing Nations:Copyright © 2009 WWW.UPSCPORTAL.COM
The G-20 (more formally, the Group of Twenty Finance Ministers and Central Bank Governors) is a group of finance ministers and central bank governors from 20 large economies while the G20 (Group of 20, also variously G21, G22 and G20+) is a bloc of developing nations established on 20 August 2003. The group emerged at the 5th Ministerial WTO conference, held in Cancun, Mexico from 10 September to 14 September 2003. The G-20 accounts for 60% of the world's population, 70% of its farmers and 26% of world’s agricultural exports.
Its origins date back to June 2003, when foreign ministers from Brazil, India and South Africa signed a declaration known as the Brasilia Declaration in which they stated that “major trading partners are still moved by protectionist concerns in their countries’ less competitive sectors and emphasized how important it is that the results of the current round of trade negotiations provide especially for the reversal of protectionist policies and trade-distorting practices. Furthermore, Brazil, India and South Africa decided to articulate their initiatives of trade liberalization”.
Nonetheless, the “official” appearance of the G-20 occurred as a response to a text released on 13 August 2003 by the European Communities (EC) and the United States with a common proposal on agriculture for the Cancun Ministerial. On 20 August 2003 a document signed by twenty countries and re-issued as a Cancun Ministerial document on 4 September proposed an alternative framework to that of the EC and the United States on agriculture for the Cancún Meeting. This document marked the establishment of the G-20.
The original group of signatories of the 20 August 2003 document went through many changes, being known as such different names as the G-21 or the G-22. The title G-20 was finally chosen, in honor of the date of the group's establishment. Since its creation, the group has had a fluctuating membership.
Previous members have included: Colombia, Costa Rica, Ecuador, El Salvador, Peru, and Turkey. As of October 2008, the group had 23 members. The core leadership of the G-20, known as the G4 bloc, consists of Brazil, China, India and South Africa.Copyright © 2009 WWW.UPSCPORTAL.COM
The G-20, which superseded the G33, which had itself superseded the G22, was foreshadowed at the Cologne Summit of the G7 in June 1999, but was formally established at the G7 Finance Ministers' meeting on September 26, 1999. The inaugural meeting took place on December 15-16, 1999 in Berlin. In 2008 Spain and The Netherlands were included by French invitation for the G-20 Leaders Summit on Financial Markets and the World Economy and then were admitted as members de facto by the UK.
G20 Leaders Summit on Financial Markets and the World Economy was held in Washington on November 2009.In 2006 the theme of the G-20 meeting was “Building and Sustaining Prosperity”. The issues discussed included domestic reforms to achieve “sustained growth”, global energy and resource commodity markets, ‘reform’ of the World Bank and IMF, and the impact of demographic changes due to an aging population.
Trevor A. Manuel, MP, Minister of Finance, Republic of South Africa, was the chairperson of the G-20 when South Africa hosted the Secretariat in 2007. Guido Mantega, Minister of Finance, Brazil, was the chairperson of the G-20 in 2008; Brazil proposed dialogue on competition in financial markets, clean energy and economic development and fiscal elements of growth and development. In a statement following a meeting of G7 finance ministers on October 11, 2008, U.S. President George W. Bush stated that the next meeting of the G-20 would be important in finding solutions to the (then called) economic crisis of 2008.
An initiative by French President Nicolas Sarkozy and British Prime Minister Gordon Brown led to a special meeting of the G-20, a G-20 Leaders Summit on Financial Markets and the World Economy, on November 15, 2008. G20 leaders met again in London on 2 April 2009. Another G20 summit is scheduled to be held in New York City in September 2009.
G-20 Vs G20 Developing Nations:Copyright © 2009 WWW.UPSCPORTAL.COM
The G-20 (more formally, the Group of Twenty Finance Ministers and Central Bank Governors) is a group of finance ministers and central bank governors from 20 large economies while the G20 (Group of 20, also variously G21, G22 and G20+) is a bloc of developing nations established on 20 August 2003. The group emerged at the 5th Ministerial WTO conference, held in Cancun, Mexico from 10 September to 14 September 2003. The G-20 accounts for 60% of the world's population, 70% of its farmers and 26% of world’s agricultural exports.
Its origins date back to June 2003, when foreign ministers from Brazil, India and South Africa signed a declaration known as the Brasilia Declaration in which they stated that “major trading partners are still moved by protectionist concerns in their countries’ less competitive sectors and emphasized how important it is that the results of the current round of trade negotiations provide especially for the reversal of protectionist policies and trade-distorting practices. Furthermore, Brazil, India and South Africa decided to articulate their initiatives of trade liberalization”.
Nonetheless, the “official” appearance of the G-20 occurred as a response to a text released on 13 August 2003 by the European Communities (EC) and the United States with a common proposal on agriculture for the Cancun Ministerial. On 20 August 2003 a document signed by twenty countries and re-issued as a Cancun Ministerial document on 4 September proposed an alternative framework to that of the EC and the United States on agriculture for the Cancún Meeting. This document marked the establishment of the G-20.
The original group of signatories of the 20 August 2003 document went through many changes, being known as such different names as the G-21 or the G-22. The title G-20 was finally chosen, in honor of the date of the group's establishment. Since its creation, the group has had a fluctuating membership.
Previous members have included: Colombia, Costa Rica, Ecuador, El Salvador, Peru, and Turkey. As of October 2008, the group had 23 members. The core leadership of the G-20, known as the G4 bloc, consists of Brazil, China, India and South Africa.Copyright © 2009 WWW.UPSCPORTAL.COM
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