[DEBATE] : (Fwd) G20

[Patrick Bond]

Finance chiefs eye first steps in revamping global system
SãO PAULO, BRAZIL Nov 08 2008 10:05

Looking to take the first steps toward revamping a global financial 
system ravaged by crisis, leaders from the main industrialised and 
emerging economies gather on Saturday seeking common ground.

Yet the talks involving the Group of 20 leading nations faced a host of 
challenges to find unity from diverse perspectives of the United States, 
European Union and the main emerging nations.

European leaders have said they hope the São Paulomeeting will lay the 
groundwork for the start of key reforms to be put in motion starting 
with a November 15 summit in Washington of G20 leaders.

The United States, in transition ahead of the inauguration of 
president-elect Barack Obama, has played down expectations for any major 
new initiatives in a crisis that began with a meltdown in the US real 
estate market and quickly spread to the banking system, becoming a 
credit crisis crippling the global economy.

The emerging nations meanwhile are arguing the crisis shows a need for 
wider participation in the management of the global economy beyond the 
Group of Seven wealthy nations.

The top emerging economies -- Brazil, Russia, India and China -- want "a 
reorganisation of the world financial system," Brazilian Economy 
Minister Guido Mantega told reporters on Friday.

The G7 is no longer sufficient to address global crises such as the one 
rippling around the world and the G20 should be strengthened, Mantega 
said after a meeting with his counterparts from the other so-called BRIC 
countries.

Mantega, summarizing his discussions with the finance ministers from 
Russia, India and China, said "we have come to the conclusion that there 
must be a reformulation, a reorganisation of the world financial system".

Specifically, he said, the system put in place by the 1944 Bretton Woods 
agreement was outdated and needed to be changed to take into account the 
greater economic importance of emerging nations.

The G7 -- Britain, Canada, France, Germany, Italy, Japan, the United 
States -- "is not sufficient", he said.

The emerging nations want to see the G20 -- which includes the G7 and 
the BRIC countries plus other significant economies such as Australia, 
Indonesia and Turkey -- reinforced and elevated to a heads-of-state and 
heads-of-government level, above the finance ministerial status it 
currently has.

A joint statement by the BRIC finance ministers said they would 
"continue to take all necessary steps to lessen the impact of the recent 
turmoil on economic activity, aiming to preserve medium and long-term 
growth".

They stressed "there is an urgent need to find mechanisms ... to restore 
the real economy's access to credit, stimulate demand and to resume 
capital flows".

The BRIC ministers also put the blame for the current crisis with the 
world's most advanced economies, noting that it began in the United 
States and quickly spread to Europe.

Sergio Jellinek, a World Bank spokesperson for Latin America, said that 
the weekend talks in São Paulo one week ahead of a summit of world 
leaders "can contribute a sort of roadmap to orient actions to confront 
the global crisis".

Jellinek added that the World Bank considers it important to have 
"better participation by emerging economies in any decisions".

The official added: "Emerging nations are that that are producing growth 
during the current crisis. It is necessary that any global mechanisms 
reflect the world as it is today, not at the end of World War II."

The São Paulo meeting, which will include the finance ministers and 
central bank governors from the United States, China, Japan and Europe, 
among others, is seen as a preparatory session for a hastily called G20 
summit in Washington on November 15.

The EU meanwhile put together its "wish list" for the summit, including 
tougher regulation of markets and a stronger role for the World Bank and 
International Monetary Fund.

The United States, backed by Canada, is playing down expectations for 
the summit.

Yet one US official speaking on condition of anonymity said the 
Washington summit may go beyond a statement of principles.

"We think we may be able to agree ... on some actions that we can take 
in the near term," the official told reporters.

Those might include steps to increase transparency, improve risk 
management, coordinate among regulating authorities, and even the 
adoption of more consistent and convergent rules, in the areas like 
accounting or capitalization, he said.

The G20 includes the seven major industrialized nations -- Britain, 
Canada, France, Italy, Japan, Germany and the United States -- plus 
Argentina, Australia, Brazil, China, India, Indonesia, Mexico, Russia, 
Saudi Arabia, South Africa, South Korea and Turkey.

It also takes in the 27-nation European Union. - AFP

***