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U.S. pushes regulation to G20 forefront
Louise Egan and Natuza Nery
TORONTO
Fri Jun 25, 2010 3:46pm EDT
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Lone protestor Abdul Adam holds down the corner of Simcoe and Front streets, main entranceway to the G20 Summit site at the Toronto Convention Centre in Toronto June 25, 2010. Adam was protesting against the adverse affects of swine flu vaccine on humanity.
Credit: Reuters/Fred Thornhill
TORONTO (Reuters) - President Barack Obama urged world leaders to follow his lead on regulatory reform on Friday while other countries touted their swifter progress in tackling debt mountains that threaten the global recovery.
World
Fresh off of an early morning victory when U.S. lawmakers reached a deal on regulatory reform, Obama 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 shortly before leaving Washington for Canada.
"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.
"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 note to clients.
While Obama can claim leadership on regulatory reform, the United States lags behind Germany, Britain and other countries in putting forward spending cuts to curb deficits. Other G20 conflict zones include trade and China's yuan currency.
British Prime Minister David Cameron downplayed the transatlantic divisions but said smoothing out imbalances between export-rich countries and debt-laden consumer economies would require belt-tightening by America, too.
"Part of dealing with the imbalances is for the worst deficit countries to roll up their sleeves, get on with the job and make sure they are living within their means," he said.
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."
Countries such as Canada and Japan, whose banks fared better during the financial crisis, have objected to some G20 reform proposals that they say unfairly punish banks that did not contribute to the upheaval.
Japanese Prime Minister Naoto Kan, in talks with German Chancellor Angela Merkel, said the reform debate should take into consideration each country's situation.
SECURING RECOVERY
The G20, which includes two-thirds of the world's population, meets in Toronto on Saturday and Sunday. The G8 -- Britain, Canada, France, Germany, Italy, Japan, Russia and the nited 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 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.
A U.S. official said Washington was not telling any country what to do, but wanted to make clear that the world can no longer rely on voracious U.S. consumers for their growth.
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 laced 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.
(Additional reporting by Claire Sibboney, Louise Egan, Huw Jones, Lesley Wroughton, Sumeet Desai, Chisa Fujioka, Reuters G20 team; Writing by Emily Kaiser; Editing by Mario Di Simine)
World
Comments
See All Comments (9) | Post Comment
Jun 25, 2010 11:43am EDT
With austerity measures sadly coming into fashion, the reality of impoverishment and homelessness for US families without jobs is a serious possiblity — many if not most of the jobs lost in the US over the past few years are permanent — the skilled unemployed in the US may want to consider immigration to other countries at this point as the US seems to have given up on creating jobs — immigration to other nations in search of work is far more honorable than seeing your family become homeless and impoverished here in the US…
mckibbinusa
Report As Abusive
Jun 25, 2010 11:59am EDT
Regulation does not spur growth.
The debt:gdp ratio is also inhibing growth.
Keynesians, please sit down. You’re failing and will always fail – look to history.
Mr. President, do you realize that context matters? You don’t just spend money to create growth, stimilus is very short term (and you’re obviously short sighted). In the past there was real job creation with the spending. Not these 3.5 week jobs (yes, on average your stimulus money created jobs that lasted only 3.5 weeks).
Perhaps when you cut the debt people will be less afraid of spending and lending. Perhaps when (well we know it won’t happen) this happens with the hopefully less ignorant person who comes after you, real economic growth will happen.
PS – fire Bernanke.
rasband
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Jun 25, 2010 12:28pm EDT
Congress is giving these banks 3-5 years to implement these ‘tough’ new reforms. Right, and so how are we going to avoid the next financial armagedean?
STORYBURNcool
Report As Abusive
Jun 25, 2010 12:43pm EDT
Congress always responds to the past assuming the so-called “meltdowns” will always happen the same way.
They never do, hence why “financial meltdown” and “housing meltdown” etc still happen and have always happened.
What needs to happen is let free market run. Why? Because businesses that don’t keep up their business plans with changing needs (i.e. newspapers who congress wants to save) fail. It’s for the best of the market.
We also need to get rid of financial illiterates such as Obama and Bernanke from trying to control anything financial related.
However, it is unfortunate that we need referees for the “game” of business because people are corrupt. But for those people who do what’s best for their clients always do well. (Our firm is not selfish, our JOB is to help clients who understand finances less than us – therefore we do what’s in their best interest and are prospering).
rasband
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Jun 25, 2010 12:55pm EDT
It’s amazing that the unemployed can’t get some assistance and yet they refuse to take away all derivative and hedge funds. We’re in this mess because of the gambling the banks have been allowed to continue with. Doctors can’t afford to take medicare payment cuts, but the unemployed can afford to skip payments. Ludicrous!
Plutocracy
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Jun 25, 2010 3:25pm EDT
The prescription for growth and getting out of this mess is simple. Too simple, really, which is why most politicians don’t accept it.
1) Cut taxes.
2) Cut spending.
3) Get rid of all these strutting politicians and all the government bureaucrats who suck the life out of everything they touch. (OK, I know this will never happen, but I really had to vent)
Gotthardbahn
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Jun 25, 2010 3:30pm EDT
It is clear that the American version of capitalism is corrupt and a failed system, having been based on inflationary bubbles that enriched an elite class, was substantiated by paper profits for the middle class, and increasingly impoverished the working class who never stood a chance to compete in a rigged system. Why is anyone now surprised at the domestic collapse, and why would anyone look to the US for advise or as an example. Of course, the global economy will not be boosted by US consumers because they have all been destroyed to enrich an elite class. God bless American and don’t forget to go wave the flag.
Anonmucker
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Jun 25, 2010 3:58pm EDT
Global financial reforms are long overdue. And the mega-banks had to be stabilized, they are too interconnected in the financial system we are all dependent on. Now they should be broken up into smaller pieces so this cannot happen again — saw a cool site; Balkingpoints ; incredible satellite view of earth
Walt67
Report As Abusive
Jun 25, 2010 4:25pm EDT
Anonmucker…I agree, in addition corruption, greed and a lack of responsibility have reached an all time high on Wall Street, as well as in the banking system and many of our American corporations. It’s as if all our business and financial leaders have lost their ethical compass. The captains of finance and industry in the past had a sense of civic responsibility instead of this new “winner take all” culture. Investment and commercial banking monopolies as well as retail monopolies like Amazon and Walmart are sucking the life out of the free market. By the way, those American flags they’re waving were likely made in China.
SkepticOne
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See All Comments (9)
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