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G20 Leaders Agree $1 Trillion Crisis Deal


Heads of state pose at the G20 summit in London

Heads of state pose at the G20 summit in London

G20 leaders meeting in London have agreed to a $1 trillion deal to combat the global economic crisis, with the bulk of the amount going to the International Monetary Fund to help countries in financial trouble.

Host Gordon Brown called it "the day that the world came together to fight back against the global recession."

The British prime minister said leaders had agreed to do "whatever it takes" to restore growth and save jobs, and to prevent another crisis like this happening again.

"Today, the largest countries of the world have agreed a global plan for recovery and reform," Brown said. "This involves the biggest interest rate cuts in history, the biggest fiscal stimulus we have ever seen, the biggest increase in resources in the history of our international institutions."

Half the trillion-dollar sum will go to the IMF to lend to countries in financial trouble. That represents a tripling of the fund's resources, which have been depleted as countries in crisis have lined up for emergency loans.

The sum also includes $250 billion in financing to boost trade and $100 billion for lending to the poorest countries.

But the final communiqué made no specific commitment to extra fiscal stimulus, after France and Germany rebuffed U.S. calls for such spending.

Instead, Brown said G20 nations had already pledged spending that would amount to $5 trillion by the end of 2010.

"G20 countries have announced and are now implementing the largest macroeconomic stimulus the world has ever seen," Brown said. "We are in the middle of an unprecedented fiscal expansion, which will, by the end of next year, amount to an injection of $5 trillion into our economies, and it will save or create millions of jobs in a period where we must combat unemployment."

Close Watch On Tax Havens

Leaders also agreed to bring hedge funds and credit ratings agencies under closer supervision. There would be an early warning system run by the IMF and a new body, the Financial Stability Board, to identify any risks building up.

There also would be new rules on bankers' pay and bonuses, with no more "rewards for failure," as Brown put it.

And there was agreement to clamp down on tax havens, those low-tax depositories used by businesses and wealthy individuals keen to avoid paying the taxman. That had threatened to be a stumbling block, with France and Germany demanding concrete measures and not just promises of action.

Leaders agreed to draw up blacklists of tax havens that do not share information on their clients.

French President Nicolas Sarkozy said the results were more than he could have hoped for. German Chancellor Angela Merkel termed the deal a "historic compromise."

Stock markets rose, apparently buoyed by the agreement.

Robert Gibbs, U.S. President Barack Obama's spokesman, told said the world had come together to deal with its problems.

The summit's results represent "broad agreement that the world is taking steps to stimulate the economy; you have broad agreement that we are going to institute tough financial regulatory reform to ensure that we never found ourselves in the same type of mess again," Gibbs said. "At last, you'll find agreement that we're working to ensure that the emerging countries, their economies don't shrink which means a vast drop in their exports and jobs back home. I think we'll have broad agreement that the world is acting together to deal with its problems."

Britain's business minister, Peter Mandelson, told RFE/RL that the boosting of IMF resources should also please countries in Eastern Europe and Central Asia.

"What's important is that we give help and deliver resources where it is needed most. And there are some economies in Central and Eastern Europe, which are more vulnerable in the current international economic crisis, whose economies are more distressed than others," Mandelson said.

He continued: "One of the points of putting resources behind the IMF and other international financial institutions is to deliver real help to boost growth, to enable those economies to take much needed steps out of the recession and to accelerate our return to global growth."

The summit did leave some participants unsatisfied, however; proposals by Russia and China for a new global reserve currency to eventually replace the dollar reportedly were not discussed.
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