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G20 economic summit: What the key players want

15 Nov 2008


Led by: President George W Bush

Problems: Home of the worst financial crisis in 80 years, triggered by the subprime lending debacle. America's stock market has plunged from more than 11,000 to under 9,000; major investment bank have failed or beenf forced into precautionary mergers; and now one of its largest manufacturing industries, car building, is on the brink of oblivion with all three of its major firms seeking government loans to avoid bankruptcy.

What they've done: $700billion stimulus package to shore up banks, $290bn of which has already been spent. Cut interest rates to 1 per cent.

What they want: Bush administration queasy about fiscal stimulus package but President-Elect Obama has indicated he wants $100bn of measures passed and will make it his first priority in the White House. US is opposed to any new international regulatory agency that would give foreign watchdogs influence over US companies, but they might agree to a more informal framework of talks proposed by Britain. Similarly, they do not regard a new Bretton Woods Agreement, extending the powers of the IMF with the same degree of urgency as European countries like France. Mr Bush's main goal will be to establish some "general principles" for dealing with financial issues, foremost of which will be an agreement to resist protectionist impulses.


Led by: Prime Minister Gordon Brown

Problems: On Wednesday the Bank of England said Britain is probably already in a recession. Banks have been bailed out or are on the brink. Job loss announcements almost daily, with BT last week announcing it would cut 10,000 jobs by March 2009. The pound has fallen to historic lows against the euro.

What they've done: Cut interest rate to 3 per cent. A £15billion package including tax cuts plus £50billion to shore up the banking industry.

What they want: Gordon Brown realises that Obama's absence will make it difficult to get concrete agreements. He is pushing plans for financial regulators in different countries to meet three or four times a year to compare notes in order to prevent the collapse of the 30 biggest banks and financial institutions worldwide. He wants a statement of intent in which all the G20 states agree to support free trade and he hopes to establish working groups that will look at longterm changes to the role and structure of the IMF. Britain is also supporting measures that could see a worldwide agreement to coordinate stimulus packages in the same way the global interest rate cut was agreed earlier.


Led by: President Nicolas Sarkozy

Problems: Government just downgraded its growth forecast (0.2 per cent-0.5 per cent next year) to the lowest prediction ever as France flirts with a recession. Unemployment is over 8 per cent. The trade deficit is at record levels. Public debt is likely to increase to reach a record 70 per cent of GDP in 2010.

What they've done: Mr Sarkozy was instrumental in winning a Europe-wide interest rate cut and EU coordination of monetary policy to support the fiscal changes. But he has been rebuffed by Britain and Germany on attempts to set up a common tax policy.

What they want: The Europeans called the meeting, so they will need to lead the way in making it work. Sarkozy has been instrumental during France's EU presidency, which ends on Dec 31, of pushing for a complete overhaul of international financial regulation. The summit will not live up to his hopes that it would be a 21st Century version of the 1944 Bretton Woods agreement that set up the IMF and World Bank. But he will push hard for moves to increase international regulation.


Led by: Chancellor Angela Merkel

Problems: Europe's biggest economy officially entered a recession on Thursday. It shrank 0.5 per cent in the third quarter after a contraction of 0.4 per cent in the second quarter. The world's leading exporter has been hit by a slowdown in major markets and low levels of domestic consumption.

What they've done: Announced $23billion euro stimulus package, including money for roads, tax breaks on car purchases and loans to small and medium-sized businesses.

What they want: Not as keen as some on a worldwide coordinated fiscal stimulus package. Mrs Merkel argues that the IMF should get greater powers to oversee global financial companies. She also backs revised rules for rating agencies and an effort to make it more difficult for companies to hide risks outside their balance sheets.


Led by: Premier Wen Jiabao

Problems: As markets in the West have dried up in the credit crunch, China has found itself far more exposed than it initially feared. Some economists predicted that growth, which was nearly 12 per cent last year, could fall to as low as 6 per cent next year. China has been trying to lower Western expectations that it will join in global actions, stressing its domestic economic problems and limited resources as a developing country.

What they've done: Announced fiscal stimulus package worth $586 billion to be spent on infrastructure and social welfare. People's Bank of China cut interest rates to 6.66 per cent. Recently adopted export subsidies, seen as unhelpful by Europeans given that China is running the world's largest trade surplus.

What they want: Wants the rest of the world to sign up for fiscal stimulus package, but is less keen on gestures of support for free trade. Others want them to put a couple of hundred billion into funding the IMF, but Mr Wen says China's own stimulus package is the largest contribution it can make to global stability.


Led by: Prime Minister Manmohan Singh

Problems: Not badly hit by the financial crisis, its banks seem to have good credit ratios but risk of export slowdown as developed countries who buy Indian products go into recession. Economic growth expected to slow from 8.9 per cent over the past 4 years to 7.5 per cent this year and next. $12.5 billion has been lost from Indian equity markets this year. The Bombay stock exchange is down 53 per cent. The rupee has fallen more this year than at any time since 1996.

What they've done: Cut main short term lending rate from 8 per cent to 7.5 per cent. State Bank of India cut interest rate to its best clients to 13 per cent.

What they want: As major representative of the developing nations, India, along with Brazil, will lead demands for greater non-European representation on the boards of major international bodies like the IMF. They will find common cause with France in seeking to overhaul existing world financial architecture the G7, the IMF and the World Bank, which they see as outdated. Likely to seek acknowledgement that America is responsible for the current crisis, causing friction with the US .


Led by: President Dmitry Medvedev

Problems: Stock market is often closed. The ruble is plunging despite interest rates of 12 per cent. Falling oil prices mean the Russian government has seen its revenues slashed in half and forced it to revise next year's budget, tapping reserves of cash saved up from the oil boom.

What they've done: Raised refinancing interest rate from 11 per cent to 12 per cent to slow capital flight from Russia and counter inflation.

What they want: Russian officials have called for a new international financial architecture - an idea reiterated by Mr Medvedev during his debut state of the nation address earlier this month. They want the IMF and World Bank to hand out money to struggling nations without the Western capitalist political preconditions they sometimes impose.


Led by: Prime Minister Taro Aso

Problems: A leading member of Japan 's central bank said on Thursday that Asia 's largest economy faces a long slump. Bank of Japan's policy board member, Seiji Nakamura, said the financial crisis is curbing economic growth, "putting the Japanese economy on the brink of a long-term adjustment phase". Exports fell nearly 10 per cent in the first 20 days of Oct alone, corporate bankruptcies jumped 13.4 per cent year on year.

What they've done: Announced fiscal stimulus package worth $275billion, including credits and loans to help small businesses. Cut interest rates from 0.5 per cent to 0.3 per cent.

What they want: Like China, may be expected to shoulder the burden of funding any new measures agreed at the summit. They will announce at the summit plans to offer $100 billion to help fund the IMF, money that will go to impoverished developing countries.


Led by: King Abdullah

Problems: De facto representative of all major oil producers at the summit. Few macroeconomic problems. The size of the economy has doubled in 4 years. But the Saudi bourse lost some 40 per cent of its value this year and some large infrastructure projects have been called into doubt by the fall in oil prices from $147 a barrel in July to under $60 now.

What they've done: 70 per cent of the foreign reserves of Saudi Arabia 's central bank are in US government bonds and they have provided support and confidence to the US economy and the dollar.

What they want: Others want them and other oil exporters, who benefitted from the recent high oil prices, to make a substantial contribution to funding the IMF. In return, will want to see more influence for non-European nations on the IMF board. Will join calls for greater oversight of financial markets and of banks in the West and will demand the IMF plays a bigger role in monitoring industrial nations economies. Reluctant to be a cash cow for the West.


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