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U.S. pushes regulation to G20 forefront

25 June 2010 22:45 (UTC +04:00)

Baku â€“ APA. A U.S. regulatory reform deal on Friday put banking rules high on a crowded agenda as world leaders gathered in Canada to figure out how best to secure a shaky economic recovery, APA reports quoting â€œReutersâ€.
U.S. President Barack Obama, heading to Canada just hours after lawmakers agreed on a regulatory overhaul, prodded his Group of 20 colleagues to make good on their own promises to clamp down on the risky behavior by banks blamed for unleashing the worst financial crisis in 80 years.
"This weekend in Toronto I hope we can build on this progress by coordinating our efforts to promote economic growth, pursue financial reform, and to strengthen the global economy," he said.
"We need to act in concert for a simple reason: this crisis proved and events continue to affirm that our national economies are inextricably linked."
The G20 club of rich and emerging economies banded together at the height of the financial crisis and committed trillions of dollars to fight a deep recession. Its united front is widely credited with averting an even deeper downturn.
But as economies slowly heal, disagreements are piling up over the next steps and G20 unity is fraying, unsettling investors who fear splintering could undermine the recovery.
Conflict zones include how quickly governments should shift from supporting the recovery to repairing tattered public finances, the role of trade in bolstering growth, and China’s yuan currency.
"The cohesion generally evident among policymakers in dealing with the global crisis is in danger of giving way to a more divisive debate about how to manage the recovery," Credit Agricole analysts said in a morning note to clients.
The G20 pledged last year to coordinate a string of reforms by the end of 2012 and Obama can boast he has met the bulk of those commitments with the United States a model to follow.
Europe has yet to come up with comprehensive rules.
"We are just not working in tandem and it’s not good enough," said Peter Skinner, a British center-left member of the European Parliament which approves EU financial reforms. "This may ruffle a few feathers at the G20 this weekend."
SECURING RECOVERY
The G20, which includes the world’s biggest economies and two-thirds of its population, meets in Toronto on Saturday and Sunday. The G8 -- Britain, Canada, France, Germany, Italy, Japan, Russia and the United States -- meets on Friday and Saturday.
Brazilian President Luiz Inacio Lula da Silva was a last-minute G20 cancellation as he opted to stay home to deal with the aftermath of deadly flooding.
The G8 agenda focuses largely on development and aid for poor countries, although the overarching economic issues cannot be ignored.
As G20 delegations arrived, thousands of protesters organized daily marches tied to themes such as women’s reproductive rights and poverty reduction.
A Canadian judge handed protesters a small and probably temporary victory on Friday, restricting the use of a controversial sound cannon used for crowd control.
Since the last G20 meeting in Pittsburgh last September, the global economy has strengthened but Greece’s debt troubles have put a spotlight on the poor state of government finances among rich countries.
Germany and Britain have pushed ahead with plans to curb government spending. They argue that with fiscal health comes confidence, and that breeds growth.
The United States, whose own deficits have soared to the highest level since World War Two, has pushed for patience, warning that the recovery may not be robust enough to withstand a simultaneous drawdown in public support.
Recent economic data has cast doubt on the strength of the recovery. Figures released on Friday showed U.S. economic growth in the first three months of the year was more tepid than first thought.
The United States, Europe and Asia are all banking on exports to try to make up for sluggish demand at home, setting up conflicts over trade and currency exchange rates.
Washington wants countries with trade surpluses, like China, Germany and Japan, to buy more at home, but those countries are also counting on exports to lift growth.
China seemed to defuse some of the G20 trade tension last weekend when it unexpectedly said it would ease its grip on the tightly managed yuan currency. But some economists have questioned whether the move was anything more than symbolic.
"In short, they’re playing games," Nobel-winning economist Paul Krugman wrote in the New York Times. "China needs to stop giving us the runaround and deliver real change. And if it refuses, it’s time to talk about trade sanctions."
Should the G20 need a moment of levity, it may turn to the soccer World Cup in South Africa, although even that was fraught with tension.
When asked on Friday who he is rooting for at the tournament, Canadian Finance Minister Jim Flaherty declined comment, saying he didn’t want to offend any of his G20 colleagues. "It’s sensitive enough," he said.