Middle-east Arab News Opinion | Asharq Al-awsat

Obama Hosts G20 One Year After Meltdown | ASHARQ AL-AWSAT English Archive 2005 -2017
Select Page

WASHINGTON (AFP) – A year after global finance imploded, US President Barack Obama hosts a G20 summit starting 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.

UN-led negotiations are tasked with forging a treaty in Copenhagen in December to curb the heat-trapping emissions that drive global warming and help poor countries most threatened by drought, flood and rising sea levels.

As the world financial system is revamped, emerging nations led by Brazil, China, India and South Africa will be hoping Pittsburgh delivers on their demands for greater representation and voting rights in the International Monetary Fund and the World Bank.

Chinese President Hu Jintao and Obama will look to bury the hatchet on tire tariffs as the importance of the relationship between Beijing and Washington takes precedence over the simmering trade dispute.

Leaders could also flesh out proposals agreed by G20 finance ministers in London earlier this month to force banks to have fatter capital cushions once the recession is over.

There have been long-running attempts to reform the so-called Basel II capital requirements — the risk-weighted framework for how institutions handle their capital.

The inaugural summit of finance ministers and central bank governors from the world’s 19 largest economies plus the European Union took place in Berlin in 1999.

A first meeting of G20 leaders, the brainchild of Britain’s Brown and France’s Sarkozy, was organized in Washington in November 2008 as an urgent response to the financial crisis.

Pittsburgh, the venue for this third leaders’ summit on Thursday and Friday, is a model of economic transformation after its rapid evolution from flagging steel producer to become a haven for “green” business.

The mayor of the state of Pennsylvania city on the Ohio river has stepped up security, drafting in 4,000 police reinforcements. He will be keen to avoid the ugly protests that accompanied the London G20 meet and left one man dead.