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World leaders agree to more regulation at summit

Published on 17/11/2008

Washington -- The world's 20 top economies reached a deal to better regulate global financial markets and take steps to halt a global economic slide in an emergency summit hosted by US President George W. Bush in Washington on Saturday.

Negotiators agreed on a final declaration calling for fundamental reforms to the international finance system during the first-ever summit of the Group of 20 (G20) nations.

Leaders have signed off on the agreement, promising that "all financial markets, financial products and market participants" will be subject to regulation or appropriate supervision, according to the final declaration.

That includes regulating hedge funds and boosting transparency of some of the complicated mortgage-related securities created by financial firms, which have been blamed for sparking the current credit crisis.

Finance ministers have been given a deadline of March 31 to hammer out 50 concrete proposals, followed by another summit of the G20 leaders at a later date, according to the declaration.

The G20 brings together a mix of industrial nations and developing economies. The Washington summit marks the first time leaders of the G20 have ever come together — a nod to the growing importance of emerging economies such as China, India and Brazil.

With leading economies in Asia, the Middle East and Latin America likely to continue to clock up growth rates next year while advanced nations slump into recession, emerging economies have used the summit to press their case for a bigger role in the world’s leading economic forums.

Bush greeted world leaders of the G20 earlier Saturday saying he was pleased with the early results after leaders held a working dinner at the White House Friday night.

But Bush, who is hosting the summit, again warned nations against restricting free markets and trade as a result of the financial crisis.

"I am pleased that we’re discussing a way forward to make sure that such a crisis is unlikely to occur again," said Bush, as he welcomed leaders at Washington’s National Building Museum. "And I am pleased that the leaders reaffirmed the principles behind open markets and free trade."

The meeting in the redbrick museum building was closed to the press but is designed to be a free and open discussion between world leaders on ways of averting financial crises in the future.

Flanked by their finance ministers and sitting around a square table, the G20 leaders met in the museum’s ornate Great Hall to consider ways of averting a crisis similar to the one that has engulfed financial markets.

Speaking ahead of the meeting, German Chancellor Angela Merkel said the G20 summit marked a "new beginning" for international cooperation and would ensure that "all market participants, all products and all markets will be truly monitored and regulated."

The move to better monitor world financial markets comes in the wake of a round of stock market turmoil and a sharp downturn in the world’s economy. The International Monetary Fund (IMF) has forecast a global recession in 2009.

At the White House dinner Friday night, world leaders discussed the need for a fiscal stimulus package at the global level, which should be coordinated by industrialized nations, members of the Spanish delegation said late Friday.

"The fundamentals of the economy are not bad," said Spanish Prime Minister Jose Rodriguez Zapatero "We can and must get out of this situation, but we need coordinated actions for that."

Media reports said Brazil could announce its own stimulus package in conjunction with the summit, while China unveiled its own 588- billion-dollar stimulus in the run-up to the Washington meeting.

But a stimulus package is unlikely to come about in the United States until president-elect Barack Obama takes office in January. Talks in the current Congress have stalled but Obama has pledged to make it his first priority.

Obama is not attending the summit but in a radio address Saturday said he was glad Bush "initiated this process because our global economic crisis requires a coordinated global response."

The President-elect has sent former secretary of state Madeleine Albright and former Republican Congressman Jim Leach to meet over the weekend with world leaders and their advisors on his behalf.

Global stocks have been decimated by the financial turmoil that was triggered by a meltdown in the US mortgage market but has since spread to all corners of the globe.

In the final declaration, leaders also promised more risk management controls and higher capital requirements to prevent financial firms from going into too much debt, as well as more controls on credit rating agencies that failed to spot the crisis.

Leaders are also likely to instruct the World Bank to beef up its lending to developing countries, some of which are facing critical cash shortfalls.

Japan on Friday pledged 2 billion dollars to the World Bank’s efforts and planned to add 100 billion dollars to the IMF’s own lending program.

Chris Cermak and Andrew McCathie/DPA/Expatica