G20: Pledge by pledge

G20: Pledge by pledge
Leaders of the G20 group of the world's most powerful countries pledged to bring the world economy out of recession when they met in London in April.

As they meet in Pittsburgh, five months later, just how far have their governments gone in meeting some of their key commitments?


In April, headlines trumpeted a $1.1 trillion deal to help countries fight the economic crisis. Much of this funding was to be directed toward the International Monetary Fund.

•The G20 has succeeded in increasing the IMF's lending capacity by $500bn to $750bn. The target was only met earlier this month after the EU increased its initial pledge of about $100bn to $178bn. Only a tiny fraction of this ($2.3bn) has so far been allocated
•The IMF has allocated an additional $250bn worth of reserves to member countries that can be tapped when needed. Around $100bn has been allocated to developing countries
•The IMF has also approved its first major sale of gold since 2000 to raise money for additional financing for poor countries. The sale of 403 metric tonnes of gold should raise $13bn - more than the $6bn asked for by the G20
•The G20 also pledged to help boost trade by providing $250bn worth of financing, with $50bn expected to come from the World Bank. The G20 says that $65bn has been taken up so far. For its part, the World Bank has only received commitments of $7.8bn from donors
•The G20 said it would support an increase in lending to poor countries of at least $100bn through multilateral development banks (MDBs). The G20 says MDBs are planning to lend an extra $110bn this year but concrete figures are hard to come by and it's not clear if this is from fresh or existing funding.


G20 governments pledged a total of $5tn in stimulus measures to boost their own economies, predicting that the extra cash would increase global economic output by 4% by the end of 2010.

However, few countries have detailed exactly how much they have spent and the IMF's own estimate is slightly more cautious at 2% of GDP in 2009 and 1.5% of GDP in 2010.

UK Prime Minister Gordon Brown has suggested that more than half of the $5tn has yet to be committed and has warned against switching off "the economic life support".

However, the debate in Pittsburgh is likely to turn to how the the global economy can wean itself off the extra support now that there are signs of a recovery.

There are also fears that increased public spending could jeopardise any rebound given


For historical reasons, smaller European countries like the Netherlands and Switzerland are over-represented on the IMF board in relation to the size of their economies, while emerging giants like China are clamouring for more power.


but calls have gathered pace in the wake of the financial crisis.
According to a draft G20 communique, an agreement has been reached on how to shift voting power to under-represented countries. It calls for a shift in voting power by at least five percentage points away from developed countries.

If implemented, the move would hurt EU countries most, with France and the UK expected to see a dilution in voting power.

It would also be a big win for the Obama administration, which proposed the 5% shift.



The G20 agreed in April that hedge funds, which have been subject to much less regulation than other investment funds, should be better supervised as part of wide-ranging measures to strengthen financial oversight.

The EU has proposed a draft law that would subject the industry to much tougher rules and make them more transparent. Funds which didn't abide by the rules would not be able to operate in its 26 member countries.

The UK thinks parts of the draft law go beyond what is required to make the sector safer and could drive hedge funds out of London, where many are now based.

However, there is broad agreement among G20 members that hedge funds should be required to submit more information and data to regulators.


The G20 reckons there has been most progress on this issue, with governments eager to boost tax receipts as the recession hits public finances.

Since April 2009, 13 jurisdictions, including Belgium and Austria, have implemented internationally agreed tax standards, according to the OECD which monitors tax matters.

Switzerland and Liechtenstein remain on a "grey list" of about 33 tax havens but have agreed to co-operate with foreign tax authorities.

The G20 has given tax havens until March 2010 to co-operate on tax evasion or face sanctions.


•Still to implement agreed tax standards: Andorra, Anguilla, Antigua and Barbuda, Bahamas, Belize, Brunei, Chile, Cook Islands, Costa Rica, Dominica, Gibraltar, Grenada, Guatemala, Liberia, Liechtenstein, Malaysia, Marshall Islands, Monaco, Montserrat, Nauru, Netherlands Antilles, Panama, Philippines, St Kitts and Nevis, St Lucia, St Vincent and the Grenadines, Samoa, San Marino, Singapore, Switzerland, Turks and Caicos Islands, Uruguay, Vanuatu Source: OECD

There has been broad backing for restrictions on banking bonuses, which have been blamed for encouraging excessive risk-taking by some in the financial industry.


but the US and UK have rejected calls for mandatory caps on bonuses. Given this disagreement, the G20 is most likely to agree some kind of "set of principles" for banker compensation.
Broadly speaking, European countries - France, Germany and the Netherlands - are taking tougher action than the US and UK.


The G20 in April agreed to establish the Financial Stability Board to make the financial system less vulnerable to future crises by encouraging cross-border cooperation on regulation.

Based in Basel, Switzerland, the international agency is a beefed-up successor to the Financial Stability Forum and brings together national regulators to discuss issues such as banker pay, accounting standards and requiring banks to hold more capital to absorb losses.

It held its second meeting earlier this month and will submit papers to the G20 in Pittsburgh on bonuses, on progress since the first summit and what future steps need to be taken to better regulate the financial industry.

To date, however, the most concrete steps on strengthening financial regulation have taken place at the national level and it is not yet clear how important a body this will become.

Story from BBC NEWS:
http://news.bbc.co.uk/go/pr/fr/-/2/hi/business/8266820.stm

Published: 2009/09/27 11:10:10 GMT

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