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G-20 Summit Offers $1 Trillion In Economic Help
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G-20 Summit Offers $1 Trillion In Economic Help

Economy

G-20 Summit Offers $1 Trillion In Economic Help

G-20 Summit Offers $1 Trillion In Economic Help
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Leaders of the Group of 20 nations have approved more than $1 trillion of additional resources for the International Monetary Fund and World Bank. They also agreed on a regulatory crackdown that will bring hedge funds and other financial institutions under tighter global supervision.

RENEE MONTAGNE, host:

This is MORNING EDITION from NPR News. Good morning. I'm Renee Montagne.

STEVE INSKEEP, host:

And I'm Steve Inskeep.

For at least the third time in recent weeks the stewards of our economy have found a way to say they're throwing another trillion dollars into the fight. The latest trillion was pledged in London where leaders of the world's biggest economies met. And as NPR's John Ydstie reports the pledge is about a trillion dollars more than some might have feared.

JOHN YDSTIE: In the days just prior to the G-20 meeting high expectations alternated with fears of a walkout by some leaders that could lead to collapse. But when the summit host, British Prime Minister Gordon Brown, reported the result of the meeting yesterday, he said the world had come together to fight back against the global recession.

Prime Minister GORDON BROWN (Britain): These are not just a single collection of actions; this is collective action, people working together at their best. I think the new world order is emerging and with it the foundations of a new and progressive era of international co-operation.

YDSTIE: That new world order includes tougher regulation for a global economy run off the rails by too much risk taking, including more controls on hedge funds and tax havens and common global principles on executive pay. The new world order also boosts the resources of the international monetary fund and World Bank. The leaders pledged more than a trillion dollars. most of it to aid middle income and developing countries hit hard by the downturn.

Brown said The IMF and a body called the Financial Stability Board would also get new responsibilities.

Prime Minister BROWN: Alongside these extra resources, we will ask the international institutions to strengthen their independent surveillance of the world economy and to promote growth and the reduction of poverty.

YDSTIE: Among the duties keeping tabs on huge firms that might pose a risk to the global economy. The IMF will also assess whether additional fiscal stimulus is needed around the globe. Coming into the summit President Obama pushed for even greater stimulus spending by the G-20 economies, but European leaders, including French President Sarkozy and German Chancellor Merkel, opposed that arguing that the summit should focus on curbing the excesses of global capitalism. In the days before the summit, it was feared those differences might be fatal. But after the meeting yesterday President Obama said the fears were overblown.

President BARACK OBAMA: Some commentators confused honest and open debate with irreconcilable differences.

YDSTIE: In fact it turns out President Obama played a role in bridging the differences between France and China over the regulation of tax havens, but the president failed in his effort to get more stimulus spending. During his news conference, he was asked to assess his performance.

Pres. OBAMA: Overall, I'm pleased with the product and I leave it to others to determine whether me and my team had anything to do with that.

YDSTIE: Mr. Obama remarked that there had been comparisons made between this summit and the last overhaul of international economic architecture at Bretton Woods in 1944. He suggested that getting agreement among the 20 leaders in London might have been more challenging.

Pres. OBAMA: Well, if it's just Roosevelt and Churchill sitting in a room with a brandy, yeah, that's a easier negotiation.

(Soundbite of laughter)

Pres. OBAMA: But that's not the world we live in, and it shouldn't be the world that we live in.

YDSTIE: Indeed, the new world order that includes rising powers like China and a humbling of U.S. style free market capitalism probably means less power for the United States to orchestrate the outcome of these kinds of global economic meetings.

John Ydstie, NPR News, London.

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G-20 Heads Offer $1.1 Trillion To Aid World Economy

Leaders of world economic powers agreed Thursday to a mix of financial assistance and regulation designed to fight off the worst recession since the 1930s, as a one-day summit in London came to a close.

British Prime Minister Gordon Brown said the G-20 leaders would pump more than $1.1 trillion into the world economy through the International Monetary Fund and other organizations and impose stricter regulations on financial institutions that include oversight of executive pay, tax havens and hedge funds.

"We are rebuilding the international financial system so that it serves the people, rather than, as on occasion, it has served itself," Brown said at the close of the daylong summit.

He said the plan includes tripling the resources available to the IMF to $750 billion, supporting $250 billion in IMF reserves called Special Drawing Rights and ensuring $250 billion to support trade.

Brown, the summit host, said the European Union and Japan have each agreed to contribute $100 billion to boost IMF resources, and the U.S. suggested it might contribute a similar amount. China will contribute $40 billion and gain more power at the IMF, he said.

The G-20 leaders –- who include the leaders of 19 industrial and developing countries and the European Union –- also asked the IMF to open sales of its gold reserves to raise money to help poor countries.

Attending his first international summit, President Obama lauded the actions taken by G-20 leaders, saying he believes the group made strides toward turning around the global economy.

"I'm excited about the ability not just to help heal this economy but also to make progress on a sustainable model of economic growth that relies less on a cycle of bubble and bust — something that I've spoken about back home," Obama told a news conference.

He acknowledged that other world leaders "indicated from their perspective that this [financial problem] started in America, or this started on Wall Street, or this started with particular banks or companies.

"You know, perhaps what helped was my willingness to acknowledge — and it's hard to deny — that some of this contagion did start on Wall Street," he said. But he also noted, "I think that part of the reason people didn't give me too hard a time is because if you look at European banks or Asian banks, they've had their own issues."

In addition to the financial pledges by the G-20, Obama said he plans to ask Congress to provide $448 million in assistance to vulnerable populations from Africa to Latin America and double the amount of money the U.S. provides for food safety to more than $1 billion.

Although G-20 leaders skirted the issue of pumping additional stimulus money into their home economies, Brown said the actions that have been taken thus far will put an additional $5 trillion into the economy by the end of next year.

"Together with the measures we have each taken nationally, this constitutes a global plan for recovery on an unprecedented scale," Brown said.

Those actions will restore credit, stimulate growth and save or create millions of jobs in the global economy, he said.

The G-20's closing statement also said that world leaders agreed to the creation of a new supervisory body to oversee the global financial system. That includes reining in excessive pay for executives, regulating hedge funds and publishing a blacklist of tax havens.

Acknowledging that problems in the U.S. financial industry were a factor in the current economic meltdown, Obama said he supported the move for greater oversight.

"We thought it was important to make sure that we had a strong, coordinated regulatory response, and many of the details of the regulatory response draw from principles that we had developed prior to coming here," Obama said.

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