British Prime Minister Gordon Brown called it “the day the world came together to fight back against global recession”.
US President Barack Obama said G20 leaders had taken the “steps critical to preventing us sliding into a depression”.
Australian Prime Minster Kevin Rudd said governments could now “crack down on the sort of cowboys in global financial markets that have brought global markets undone with real impact for jobs everywhere”.
But behind all the rhetoric and spin, what was really announced at the G20 meeting last night? Some commentators are hailing it as a step forward, while critics a lamenting another opportunity missed.
Let’s take a look via the magic window of a SmartCompany Q&A.
Gordon Brown says the G20 are spending $7 trillion on these global recovery efforts. Can’t argue with sort of cash, can we?
Well, maybe we can. It appears that Brown’s figure includes all the stimulus packages announced by all the members of the G20 over the past 12 months of so, and expected over the next six months. So let’s be clear – the G20 did not come up with $7 trillion of new money last night.
How much did they come up with?
About $1.1 trillion. There was $US750 million for the International Monetary Fund, which will be able to lend this to countries that are having credit issues. The G20 also increased the IMF’s currency reserve by $US250 million to help increase trade. Finally, the IMF will sell $US6 billion of its gold reserves to help developing countries.
Well, that’s still pretty impressive, isn’t it?
Any boost to global trade is a good thing in the currently climate, particularly in Australia, where we’re being hit hard by falling exports to nations such as China and Japan. But back in November 2008, Obama and other leaders had been talking about the need for the G20 to come up with a massive, global fiscal stimulus package. This has failed to happen.
Why?
It appears Obama could not get France and Germany to agree on the need for further stimulatory measures, which serves to emphasise the divide between Europe and the US over the global financial crisis – while the Americans want to keep throwing money at the problem to kick start the economy, the Europeans want to wait and see if the measures already taken have any effect.
What was Rudd talking about with his “cowboys” comment?
The G20 have put a raft of new measures in place to try and crackdown on the worst excesses that caused the global financial crisis.
Perhaps the biggest item is a crackdown on hedge fund and other high-risk institutions, which will now be forced to be regulated.
Secondly, there will be a crackdown tax havens, with those countries that have not signed up to global information sharing agreements set to be named and shamed and subjected to (as yet unspecified) sanctions.
Thirdly, there were some complex changes to accounting rules announced, which will essentially allow banks to avoid massive writedowns on their so-called toxic assets.
Finally, the meeting has also produced a set of principles for executive remuneration, including calls for better disclosure around remuneration components and philosophies.
So should we consider the G20 a success?
A qualified success. The new regulatory crackdown is welcome, but the lack of a big, get-us-out-of-this-mess stimulus package is a disappointment.
James was the editor and publisher of SmartCompany and LeadingCompany for five years. He is now the Australian Financial Review‘s companies & markets editor, and a former BRW editor.
