PITTSBURGH -(Dow Jones)- Group of 20 leaders hammered out compromises Friday on the difficult issues facing them as they emerge from crisis, including implementing exit strategies and restructuring the world economic and financial system. A little over a year after vowing a joint effort to restore growth and calm financial markets, the G-20 left its two-day Pittsburgh summit with a post-crisis plan.
While claiming that their extraordinary monetary, fiscal and financial measures had "worked," they vowed not to become complacent or prematurely withdraw. "We can't wait for a crisis to cooperate," said U.S. President Barack Obama at the close of the summit. "That's why our new framework will allow each of us to assess the others' policies, to build consensus on reform, and to ensure that global demand supports growth for all." With unemployment set to lag the return to growth, the leaders laid down job creation as a key requisite for undoing crisis measures. "We cannot rest until the global economy is restored to full health, and hard-working families the world over can find decent jobs," the communique said. Dominique Strauss-Kahn, managing director of the International Monetary Fund, urged the G-20 to keep monetary and fiscal stimulus in place, with unemployment expected to continue to rise next year. "This is a fragile recovery, even if risks appear to be receding," he said.
The leaders were also able to overcome divisions to embrace a new global economic order that envisions achieving more balanced growth and greater power for developing countries. Recognizing the increasing importance of countries such as China, India and Brazil, the G-20 supplanted the Group of Eight as the preeminent forum for international economic cooperation. "Now, with the passing of time, there are global challenges that the advanced countries cannot resolve alone," said South Korean President Lee Myung-bak, whose country is co-hosting the next G-20 leaders summit in June with Canada. Developing countries also moved closer to achieving another long-held goal - equal say at the IMF. The G-20 agreed to shift at least 5% of voting power in favor of under-represented members, mostly developing and emerging countries that currently hold about 43% of voting shares. Russian President Dmitry Medvedev called the decision "a very weighty contribution to the creation of a new international financial system," which shows a "responsible attitude" by leaders. Russia had proposed a 7% redistribution, but he acknowledged that under the agreement Western Europe will still cede power at the fund. Dutch Prime Minister Jan Peter Balkenende told Dow Jones Newswires in a phone interview that he was happy with the results of the summit, even though his country's own influence at the fund will shrink. "I think we can work with this situation. We have a better balance and that is very important," Balkenende said, adding that the Netherlands itself had argued for the IMF's role to be bolstered to help combat the financial and economic crisis.
An agreement to remove fossil fuel subsidies and combat global warming left many people dissatisfied, with environmentalists saying that the plan was too weak and oil companies saying that the plan would damage the economy. The G-20 stopped short of setting a deadline for eliminating subsidies amid opposition from the largest subsidizers, such as Russia. It also failed to be specific about how member countries would encourage investment in clean energy and renewables and provide financial support for such projects in developing countries. "It's an important step toward reducing global emissions but it's not enough," said Jennifer Haverkamp, the international climate policy manager at Environmental Defense Fund. The announcement could foreshadow difficult international talks in Copenhagen in December, when countries will meet to negotiate an international climate treaty to succeed the Kyoto Protocol, which expires in 2012. The U.S. never ratified the treaty, saying it would harm its economy. Oil companies repeated that message, saying that cutting back on subsidies would raise fuel costs and make it less attractive to drill for oil in places like the U.S., which gives tax breaks for domestic drilling.
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