G20 agrees next steps on bonuses, post-crisis blueprint

7th September 2009, Comments 0 comments

After a meeting in London preparing for a leaders' summit later this month, finance ministers said they agreed fresh measures to keep the world economy on the right track, a year after it teetered on the brink of collapse.

London -- The G20 vowed Saturday to maintain emergency measures to fight the world economic crisis, warning it was not over yet, while tensions between Europe and the United States remained over bankers' bonuses.

After a meeting in London preparing for a leaders' summit later this month, finance ministers said they agreed fresh measures to keep the world economy on the right track, a year after it teetered on the brink of collapse.

But they warned there was no room for complacency.

"We remain cautious about the outlook for growth and jobs," the ministers said in a communiqué.

"We will continue to implement decisively our necessary financial support measures and expansionary monetary and fiscal policies... until recovery is secured."

US Treasury Secretary Tim Geithner also urged caution, saying that while global economic growth was "underway", there remained "significant challenges" ahead.

"Actions (by the G20) have pulled the global economy back from the edge of the abyss," he said. "However, we still face significant challenges ahead."

The head of the International Monetary Fund, Dominique Strauss-Kahn, warned world leaders were "just seeing the end of the tunnel" after months of economic turmoil.

A row on bankers' bonuses had threatened to dominate the talks, with France and other European countries calling for a mandatory cap while Britain and the United States opposed such strong measures.

A compromise emerged with no pledge on capping, but agreement that some action must be taken on the issue, which is sure to be on the agenda for a summit of G20 leaders in Pittsburgh on September 24-25.

Divisions between France and the United States on the issue appear unresolved, with French Finance Minister Christine Lagarde saying she was satisfied that the issue was now "in everyone's sights".

In their conclusions, the ministers agreed to take action to reward long-term not short-term success including the "effective clawback" of payments.

They called for "global standards on pay structure... to ensure compensation practices are aligned with long-term value creation and financial stability".

Geithner brushed off questions about the French calls for a cap, saying the US welcomed the "support we found here in Europe" for reform on compensation practices.

Experts say bankers' bonuses contributed to causing the near-meltdown in the world economy which erupted a year ago because they encouraged bankers to behave recklessly in the hope of earning massive windfalls.

German Finance Minister Peer Steinbrueck said his country and France could be "very satisfied" with the outcome, adding they succeeded to a "very large extent" in achieving their pre-meeting goals.

As the worst financial crisis since the 1930s eases with France, Germany and Japan all returning to positive growth, the G20 ministers also debated when to withdraw the emergency support pumped in to shore up economies.

There was broad agreement that it was too early to wind down fiscal stimulus and many leaders echoed the views of British Prime Minister Gordon Brown, who has won plaudits for leading the international policy response to the crisis.

"It's clear in my view that too early a withdrawal of vital support could undermine the tentative signs of recovery we are now seeing and lead to a further downward lurch in business and consumer confidence," he said Saturday in opening remarks to the meeting.

More than half of the five trillion dollar expansion pledged by world leaders to boost economies has yet to be delivered, Brown said, adding this should be put in place before any winding down.

After the meeting, Brown hailed "real progress".

"The G20 has shown once again that governments from around the world can come together to agree the global governance the new global economy needs," he said.

Finance ministers also said the G20 was prepared to take action against non-cooperative tax havens from March 2010, building on a blacklist which was agreed at a leaders' summit in London in April.

The Group of Twenty (G20) finance ministers and central bank governors was established in 1999 to bring together systemically important industrialized and developing economies to discuss key issues in the global economy.


0 Comments To This Article