G-20 leaders call for fiscal stimulus, more rate cuts

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WASHINGTON, Nov 16(Agencies): Facing the gravest economic crisis in decades, the leaders of 20 countries agreed Saturday to work together to revive their economies, but they put off thornier decisions about how to overhaul financial regulations until next year, providing a serious early challenge for the Obama administration.
Though the countries' stimulus packages were cast as ambitious steps, they mainly reflected measures that the countries were already undertaking to respond to the crisis. What remains to be seen is whether, working with a new White House, the leaders will cast aside their political and economic differences to embrace more radical changes, including far-reaching but fiercely debated proposals to overhaul regulation.
The Group of 20 leaders from major industrialized and developing countries set out plans to toughen oversight for major global banks, study limits on banker pay and try for a breakthrough by year end in global trade talks -- all part of a roadmap to rebuild a financial system crippled by the credit crisis.
"We must lay the foundation for reform to help ensure that a global crisis such as this one does not happen again," they said in a statement after their first-ever summit.
They vowed to make progress before a second summit by the end of April.
The group planned its next meeting for April 30, 101 days after President-elect Barack Obama is sworn into office.
Obama, who sent emissaries but did not attend at the meeting, will find common ground with the leaders in his support of a further stimulus program in the US - something President Bush opposes. The group called for more fiscal measures to cushion the blow of a downturn that is hitting rich and poor countries.
Two senior advisers for Mr. Obama, Madeleine K. Albright and James A. Leach, met privately with leaders on the sidelines. And Mr. Obama addressed the meeting only obliquely on Saturday in his first radio address as president-elect, in which he expressed appreciation that Mr. Bush "has initiated this process, because our global economic crisis requires a coordinated global response."
U.S. President George W. Bush called the meeting, probably his last major economic event before he steps down in January, a success, saying leaders agreed to free-market, pro-growth policies.
"It makes sense to come out of here with a firm action plan, which we have. And it also makes sense to say to people that there is more work to be done," he said.
The G20 also called for fiscal stimulus measures, be they tax cuts or government spending, to take "rapid effect," and urged more interest rate cuts.
But they fell short of announcing any new measures or major regulatory breakthroughs, and left it up to individual countries over what actions to take.
G20 support though could bolster efforts in the U.S. Congress to push through a second economic stimulus plan, which is opposed by Bush and backed by his successor. Britain, also heading fast into recession, may unveil tax cuts this month.
G20 warnings on the dangers of inaction were stark.
Meeting here, in the capital of the country where the crisis began, the extraordinary gathering of leaders from the Group of 20, representing wealthy countries and major emerging economies, began what participants said would be a broad reform of the institutions that have governed global markets since World War II.
In a five-page communiqué that mixed general principles with specific steps, the G-20 pledged a new effort to bolster supervision of banks and credit-rating agencies, scrutinize executive pay and tighten controls on complex derivatives, which deepened the recent market turmoil.
"Our nations agree that we must make the financial markets more transparent and accountable," President Bush said. He warned that "a meeting is not going to solve the world's problems," and described the talks as the beginning of a process that would carry over to the next administration.
With dueling press briefings and statements through the weekend, it was clear that bridging ideological gaps among nations afflicted with different versions of the economic contagion would provide the new president and other world leaders with a daunting challenge.
There is also a more basic philosophical divide across the Atlantic: Europeans in general favor more state control over markets, even to the point of granting regulators cross-border authority, while the United States stresses the primacy of national regulators. President Nicolas Sarkozy of France, who called on Mr. Bush to organize the meeting, alluded to those differences, saying the negotiations, even on general principles, had been challenging.
Mr. Sarkozy said: "I am a friend of the United States of America, but if you ask, was it easy? No, it wasn't easy." He added that he did not fly to Washington "simply for the pleasure of traveling."
He said the Americans had made concessions even by agreeing to discuss issues like regulatory coordination and executive pay. The communiqué, however, suggested there were concessions on both sides.
Prodded by Mr. Bush, who earlier in the week gave an impassioned defense of capitalism, the leaders reaffirmed their commitment to free markets and trade. But they also clearly laid blame for the crisis at the doorstep of the United States, saying "some advanced countries" had taken inadequate steps to prevent a buildup of dangerous risks.
The meeting set out a road map for overhauling regulations in a wide range of areas, and assigned the work to groups of experts. At the next meeting, which Mr. Sarkozy proposed to hold in London, the leaders will debate specific proposals developed by those groups.
Among those measures is a European proposal to set up so-called colleges of supervisors, which would meet regularly to share information about global banks with operations in many countries.
Another idea is to expand the membership of the Financial Stability Forum, an influential group of finance ministers and central bankers from industrialized countries, to include emerging markets like Brazil and China.
Still, for all the talk of action and history-making change, some experts said the outcome was disappointing.
"This is plain-vanilla stuff they could have agreed on without holding a meeting," said Simon Johnson, an economist at the Massachusetts Institute of Technology and a former chief economist of the International Monetary Fund. "What's new, except that this is the G-20 instead of the G-7?"