G-20 Summit

The two-day Washington summ­it of leaders of the G-20 coun­tries ended on Nov. 15 against the bock­dropof what is now being des­cri­bed asthe greatest financial and econo­miccrisis in the world econo­my sincethe Great Depression of 1930s.The Summit was called at a shortnotice by President Bush under Euro­pean pressure.
The Summit was attended by the US President George Bush, British Prime Minister Gordon Brown, French President Nicolas Sar­kozy, Japanese Prime Minister Taro Aso, Russian President Dimitry Med­ve­dev and other G-20 leaders.
The G-20 was formally established at the G-7 Finance Ministers’ meeting on September 26, 1999. The inaugural meeting took place on December 15-16, 1999 in Berlin. 19 of the world’s
25 largest national economies, plus the European Union (EU), collectively, the G-20 economies comprise 90 per cent of global gross national product, 80 per cent of world trade (including EU intra-trade) and two-thirds of the world population.India's Advocacy
India was represented at the Summit by Prime Minister Man­mohan Singh who advocated a multi-faceted approach to tide over the current economic crisis. He mooted a coordinated global fiscal stimulus to help mitigate the severity and duration of the recession. He raised various issues requir­ing urgent attention such as reforms of the multilateral financial insti­­tu­tions to enhance concessio­nal flaws, a caution against protectionist policies and changes in the global financial architecture to avoid a recurrence of the crisis. He also sought a mechanism of consul­tation that could yield results in terms of policy coordination. The Prime Minister was raptly heard due to the kind of technical expertise that he brought to the summit.
Draft Declaration
The 'Washington Declaration' signed by heads of state of G-20 nations em­pha­sised upon support to emer­ging economies, closer macro economic cooperation, stren­gthen­ed financial markets and regulatory regimes.
Five Common Principles
The declaration laid out five common principles for reform of financial markets to avoid future crises.
* Strengthening transparency and accountability, particularly the valuation of complex, illiquid products and the creation of a single, high-quality global standard.
* Enhancing sound regulation including a review of how valuation and leverage, bank capital and executive compensation may exacerbate cyclical trends.
* Promoting integrity in financial markets by getting national and regional authorities to work together and promote information sharing.
* Reinforcing cooperation by establishing supervisory colleges for all major cross-border financial institutions.
* Reforming international finan­cial institutions.
Action Plan
The declaration also created a task force of G-20 finance ministers to initiate processes and a timeline to do so. The task force was given an Action Plan based on five identi­fiable and tangible areas (Common Principles) to be completed before Mar. 31, 2009.
In the Action Plan are steps to boost standard of creidt rating agencies, address weaknesses in accounting and disclosure standards, ensure cooperation between national financial authorities, including meetings to share information, and a risk warning system for banks.
A 'college of supervisors' will be set up to monitor the world's biggest financial institutions, with a list of firms to be compiled by the end of March, 2009.
Other Decisions
The summit also agreed to expand the Switzerland-based Financial Stability Forum to include a broader membership of emerging econo­mies and a 12-month hiatus on protectionist measures.
The India Effect
The Group of G-20 nations heeded the call from India and other developing nations to reform international financial institutions like the IMF and World Bank. The IMF or other agencies can now review US financial systems as much as it can review India's or China's.
This is the first time the western world, particularly the US, has agreed to such far-reaching universal oversight of its financial practices.
Seven Big Messages
Prime Minister Dr. Manmohan Singh exclaimed that he saw seven big messages emerging from the Wash­in­gton Summit.
* The recognition by all G-20 leaders that there is a global crisis which calls for a global response.
* The continuing weakness of the real economy suggests that the steps taken to increase liquidity must be supplemented by a coordinated fiscal stimulus.
* The need to take special steps to provide resources to developing countries by providing adequate additional resources to the World Bank and the IMF.
* The need to introduce regulatory reforms in the financial system by improving existing stan­­dards and aligning them inter­nationally.
* The need for better multilateral surveillance of both macro-economic and financial developments.
* The imperative of avoiding a retreat into protectionism.
* The harm done by excessive speculation, by enterprise becoming a bubble on the whirlpool of speculation.
Next Summit
The British Prime Minister Gordon Brown will take over the Chairman­ship of the G-20 group of developed and emerging economies next year. Mr. Brown has announced that the next summit to discuss the global eco­no­mic crisis would be held in London in April 2009. Some of the major areas likely to be discussed are greater regulation of the finan­cial markets and a review of corpo­rate practices such as 'fat cat' perks. The summit will also review the progress on promises made at the Washing­ton meeting.
Power Shift
The present Global recession provides the major developing coun­try economies, including China and India with a real opportunity to incre­a­se their weight and influence in the world economic order.
Though, it is too early to say that they were able to capitalise on the opportunity as the Declaration does not indicate any paradigm shift in the world economic order, there was a clear indication that the balance of power is shifting in favour of emerging economies (re­pre­­se­nted in the G-20 by China and India) as the group realised that devel­oping countries were going to be the worst sufferers because of the market crisis for no fault of theirs.