G20 leaders agreed to take rapid action, including fiscal stimulus measures as needed, to stabilize financial markets and restore growth in worsening global economy, according to a draft communique.
They also support giving emerging markets more say in the global financial order.
– Fiscal measures to boost demand rapidly
– Monetary policy steps as appropriate
– More funds for the IMF to support emerging economies
– Strive for breakthrough this year in the Doha round of trade talks
– Reform of Bretton Woods institutions to give emerging economies more of a voice in line with their changing economic weight
– College of supervisors to review major global banks
– Review of accountancy standards, CEO pay, bankruptcy rules, credit rating agencies and moving credit default swaps to exchange trading
G20 finance ministers were instructed to work on specifics by March 31, 2009, ahead of the next summit.
Below are some key extracts from the text, which was provided to Reuters by a G20 official:
“More needs to be done to stabilize financial markets and support economic growth. Economic momentum is slowing substantially in major economies and the global outlook has weakened.
“Against this background of deteriorating economic conditions we agreed that a broader policy response is needed,” it said and listed immediate steps to be taken:
– take whatever further action is needed to stabilize the the financial system
– recognize the importance of monetary policy support, as deemed appropriate
– use fiscal measures to stimulate domestic demand to rapid effect, as appropriate
– help emerging markets gain access to finance, including liquidity facilities and program support
GLOBAL FINANCIAL INSTITUTIONS
“We are committed to advancing the reform of the Bretton Woods institutions so that they can more adequately reflect changing weights in the world economy in order to increase their legitimacy and effectiveness. In this respect, emerging and developing economies, including the poorest countries, should have greater voice and representation.”
In the short term:
– urgently expand the Financial Stability Forum membership to include emerging economies
– IMF and FSF to work together with IMF focusing on surveillance and FSF on regulatory standards
– help emerging and developing economies gain access to finance and ensure that the IMF, World Bank and other multilateral development banks have sufficient funds
In the medium term:
– comprehensively reform the IMF and World Bank
– give emerging and developing countries a greater voice
– strengthen the IMF’s surveillance role in giving countries advice on macro-economic and financial stability
“We underscore the critical importance of rejecting protectionism and not turning inward in times of financial uncertainty.”
– no raising of trade barriers over the next 12 months
– work on restarting world trade talks by year-end
“We shall strive to reach agreement this year on modalities that lead to a successful conclusion to the WTO’s Doha Development Agenda with an ambitious and balanced outcome. We instruct our trade ministers to achieve this outcome.”
“We will implement reforms that will strengthen financial markets and regulatory regimes so as to avoid future crises.” Regulation is firstly a national responsibility but international cooperation will be strengthened, it said.
In the short term:
– establish supervisory “‘colleges” for all major cross-border financial institutions. Major global banks should meet regularly with their supervisory college. A Canadian official said this would probably cover 25 to 30 financial institutions.
– review how pay packages affect risk-taking
– ensure credit rating agencies meet high global regulatory standards, avoid conflicts of interest and provide greater disclosure
– accounting standards to be improved
– hedge funds and private equity funds to speed up agreements on unified best practices
– more disclosure on complex financial products and ensuring complete and accurate disclosure by firms of their financial conditions
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