World leaders brace for London's high-stakes economy summit

The world economy is in far worse shape than when the group of rich and developing countries last met and set lofty goals.

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April 1, 2009 09:28
4 minute read.
World leaders brace for London's high-stakes economy summit

Obama 248.88 . (photo credit: AP)

A US-British push for more stimulus spending and widespread European agitation for tougher financial rules amid a global economic crisis will likely get a cool greeting at a G-20 summit of receding expectations. For US President Barack Obama, the stakes were high for his first time on the world stage, both in dealing with the economy and in face-to-face sessions with other leaders. He was to arrive in London on Tuesday night and planned a round of meetings with leaders on Wednesday, including Queen Elizabeth II, summit host British Prime Minister Gordon Brown, Russian President Dmitry Medvedev and Chinese President Hu Jintao. The world economy is in far worse shape than when the group of rich and developing countries last met in November and set lofty goals for international cooperation. Trade is deteriorating, protectionism is on the march and joblessness is rising. Street demonstrations have increased and widespread protests in London were expected. Brown had initially trumpeted the gathering as "a new Bretton Woods - a new financial architecture for the years ahead." But the meeting was shaping up as bearing little similarity to the 1944 conference in New Hampshire where the winners of World War II gathered to set postwar global monetary and financial order. In their meeting in November, the G-20 members vowed to avoid protectionism that could stifle trade. But since then, 17 have acted to pass subsidies to protect their own industries or limit imports. There's no clear consensus on a way forward - other than general vows of cooperation, more money for the International Monetary Fund and a greater voice for rising powers like China and Saudi Arabia. World Bank President Robert Zoellick called for the G-20 to back a $50 billion liquidity fund to keep trade moving. In rich countries, he said, "people talk of bonuses or no bonuses. In parts of Africa, South Asia and Latin America, the struggle is for food or no food." In fact, giving such economies a regular place at the table for economic summits may be one of the few accomplishments of this summit and the one held in November in Washington, recognizing the modern economic realities that countries such as China, India, Brazil and Saudi Arabia have more impact on the world economy now than some of the old victors of World War II. The leaders were mindful of the importance of appearing united, even if such statements papered over underlying disagreements. "You've got all world leaders very cognizant of the fact that any open disruptions or disagreements could shake markets and shake confidence in the way going forward," said Steven Shrage, a former US trade official who is an international business analyst with the Washington-based Center for Strategic and International Studies. London does not have a good history for successful economic summits. One held in London in 1933 failed to do much of anything to halt a global international depression - and may have actually led to more self-protective trade measures. Still, leaders were upbeat in statements Tuesday as they headed to London. "It is important and necessary for the summit to take credible decisions which will help to halt and reverse the current slowdown and to instill a sense of confidence in the global economy," Indian Prime Minister Manmohan Singh said as he headed to London. Summit partners will meet for dinner on Wednesday evening, then hold a business meeting on Thursday. It seemed likely major new declarations or initiatives would be subject to watering-down conditions at this summit. US officials, for instance, backed away from pressing too hard to urge for other nations to do far more stimulus spending. A draft of the communique circulating ahead of the meeting suggested that global leaders will embrace stimulus spending totaling about $2 trillion. But that includes a number of measures already announced. "There isn't any single number that is sacrosanct," said Mike Froman, a White House international economic adviser. Leaders of European countries, led by German Chancellor Angela Merkel, continued to resist calls for more stimulus and for printing money as the US Federal Reserve and the Bank of England have done to try to jump-start a recovery. Memories of the hyperinflation in the 1920s in Germany that gave way to the rise of Adolf Hitler's Nazi party still haunt modern-day Germany. "International policy is, for all the friendship and commonality, always about representing the interests of one's own country," Merkel said in a pre-summit interview with The New York Times. Merkel first met Obama when he traveled to Europe on a campaign trip last summer, when he was met by thronging crowds, but at a time when the economic world order seemed a lot simpler. European countries want more-aggressive coordinated regulation of risky financial strategies and transactions, such as hedge funds. The Obama administration met some of those concerns last week in unveiling a package to extend federal regulation to financial institutions not regulated as banks, such as hedge funds and insurance conglomerates. But that didn't go as far as some European leaders had hoped.


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