Britannia Radio

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TELEGRAPH            13.3.09
1. .G20 tensions high as summit approaches
South Lodge Hotel, which sits in West Sussex, somewhere between  
London and Brighton, has just about enough in common with the Mount  
Washington Hotel in Bretton Woods, Massachussets.

    By Edmund Conway, Economics Editor

Both are big majestic mansions nestled in rolling countryside; both  
were completed around the turn of the 20th century. There the  
similarities end, although Alistair Darling might hope that won't be  
the case after this weekend. For South Lodge hotel is where the  
world's leading finance ministers will pitch up on Friday night for a  
24-hour financial meeting of the G20.

Like all major summits in the past half century, this one struggles  
to escape the shadow of the 1944 Bretton Woods conference. It was at  
that summit, called in the closing period of the Second World War,  
that economists and ministers devised a structure for the world's  
financial system.

Although the system has been stripped down since then, pared of its  
fixed-currency framework and its institutions having lost their main  
roles, there never was a follow-up conference called since to remould  
the economic and financial system. Almost all of the major macro- 
economic "breakthrough" conferences in the past 50 years – for  
instance the Plaza Accord of 1985 or the Louvre of 1988 – have been  
reactive events designed to right the balance on one or other  
currency issues.

Bretton Woods was something very different – a contemplative,  
constructive, academic effort to remould the way the world economy  
was structured, and while this is what many economists crave right  
now, it is hardly what is on the bill for the G20.

The meeting this weekend represents the final opportunity for  
ministers to draw up the two or three key points to be debated at the  
final G20 ministerial summit in London on April 2. That meeting, to  
be held in London's Docklands, will be a hectic affair, with 20  
different parties trying to have their say in a mere day of debate,  
so it is vital that by the end of play on Saturday, ministers have  
sealed their differences over what really are the priorities for the  
summit.

It is anything but clear that they will. Each of the three main  
topics for the summit – the question of financial regulations,  
economic and banking rescue plans and stimulus packages, and reform  
of the International Monetary Fund – has a different cheerleader.

The Europeans, led by the French and Germans, are intent on fiercer  
financial regulations, in particular a clampdown on bonuses and on  
tax havens. The Americans want all the emphasis to be put on the need  
for more borrowing and spending by governments around the world to  
keep their economies afloat. The Chinese and Brazilians, among  
others, are keen for more attention to be paid to modernising the  
IMF, arguing that if they don't get their way they will be reluctant  
to provide more cash to keep the Fund functioning.

Somewhere in the middle of all of this sit the Britons, and it will  
be up to Alistair Darling to play honest broker to these factions on  
Saturday.

Although insiders argue that the differences between the sides have  
been overplayed in the press, there is a growing sense within  
Whitehall that the meeting itself could go either way. Draft versions  
of the communique have been floating around in recent days containing  
all three strands, but the big question is the prominence they  
ultimately receive. Should the minister emerge and declare that they  
are in complete accord, it will buoy hopes that the summit could  
indeed be the first step towards a future grand Bretton Woods-style  
agreement. Any sign of discord and the rather more dismal conclusion  
will be that nations are so at odds that finding an international  
solution will be impossible.

Given that economic disharmony has almost invariably led to  
protectionism, and this in turn to geopolitical conflict, this  
outcome would be truly disastrous. The three items on the G20 agenda  
are:

1. Financial and economic bail-outs. Can nations find a common set of  
principles for how to support banks and dispose of their toxic  
assets, alongside boosting their economies with extra spending?

2. International financial regulation, including reworking bonus  
structures and devising new schemes to control banks' balance sheets  
in the future.

3. Reforming the IMF. The fund needs a cash injection of around  
$500bn. Japan has already pledged $100bn and the US is promising to  
donate more, but the main source of new funds could be the Chinese.  
However, they are unlikely to donate without securing important  
concessions.
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2. G20: Barack Obama not seeking 'specific commitment' at London summit
Gordon Brown's hopes of striking a major agreement at his London  
summit on the world economy have been dealt a major blow when the  
White House said President Barack Obama will not seek any "specific  
commitment" at the meeting.

By James Kirkup, Political Correspondent

The statement from the White House was the latest sign of a growing  
trans-Atlantic rift which threatens Mr Brown's hopes that leaders at  
the April 2 summit will agree a "global new deal" of economic and  
financial reforms.
Mr Obama, backed by Mr Brown, has been arguing that world leaders  
should use the summit to agree more fiscal stimulus measures,  
borrowing in order to inject billions more into their faltering  
economies.

But Germany and France have led European resistance to the plan,  
insisting that the summit should instead focus on agreeing tougher  
rules on financial regulation.

France's President Nicholas Sarkozy flatly rejected any more stimulus  
measures on Thursday.

In response, the White House appeared to write off any hope that the  
London summit will produce a substantial agreement.
"We're not going to negotiate some specific economic percentage or  
commitment," Mr Obama's spokesman Robert Gibbs said.

Mr Brown has staked his credibility on the summit. Lord Malloch- 
Brown, the Foreign Office minister, has said that the Prime Minister  
"cannot afford" to have the meeting fail, and warned that the  
financial markets will be "a disaster zone" if the summit produces  
anodyne conclusions.

Despite the Prime Minister's hopes of unity, the US-EU dispute about  
the summit appears to be worsening.

Timothy Geithner, the US Treasury Secretary, on Wednesday called for  
the G20 countries to agree a "substantial, sustained commitment to  
stimulus" at the London meeting.

But meeting in Berlin, Mr Sarkozy and Angela Merkel, the German  
chancellor, issued a joint statement rejecting more stimulus measures  
and arguing that the London summit must focus on banking rules.

European countries have already launched stimulus packages, and are  
wary of taking on more debt, the leaders said.

"The problem is not about spending more, but putting in place a  
system of regulation so that the economic and financial catastrophe  
that the world is seeing does not reproduce itself," Mr Sarkozy  
said.  [That will do absolutely nothing to help in the PRESENT crisis  
-cs]

Mr Brown is about to embark on a frantic round of diplomacy before  
the summit.

He will meet Mrs Merkel on Saturday to prepare and then attend a  
Brussels meeting of EU leaders next week where he will try again to  
narrow the Transatlantic divide.

Phillip Hammond, the Conservative shadow chief secretary to the  
Treasury, said: "It looks like the rest of the world is refusing to  
dance to Gordon Brown's tune as he seeks to orchestrate the G20  
summit for his own domestic political purposes."
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BBC ONLINE            13.3.09
Brown to meet Merkel ahead of G20

Gordon Brown is to hold talks with German leader Angela Merkel as he  
presses for tougher global financial regulation and efforts to boost  
demand.

Pressure is growing on the UK from other European countries over talk  
of a fresh economic stimulus package.

France and Germany said they would send a "common signal" at April's  
crucial G20 meeting in London that "spending more" was not an answer  
to the crisis.

G20 finance ministers meet in the UK this weekend to prepare for the  
summit.

Crucial meeting
Mr Brown says there is consensus in the EU about the action needed to  
tackle the global banking crisis and the economic downturn.

The German chancellor will arrive in the UK on Friday for talks at  
Chequers as the build-up to the G20 summit gathers pace.

Chancellor Alistair Darling will use a meeting of his G20  
counterparts in Sussex to press the UK's case for tougher powers for  
financial regulators to curb excessive risk taking by banks.

Agreement at April's summit is seen as vital to showing that Mr  
Brown's calls for a co-ordinated global response to the crisis are  
being heeded by other major economies.

Mr Brown has made repeated calls for tougher regulation and is under  
pressure from opposition parties to show tangible progress is made in  
London.

Economic catastrophe
But the UK's efforts to convince other countries of the need to agree  
a further stimulus package next month seem under strain.
Speaking ahead of her visit to the UK, Mrs Merkel appeared to rule  
out any such agreement.

"The issue is not spending even more but to put in place a regulatory  
system to prevent the economic catastrophe that the world is  
experiencing from being repeated," she said at a meeting with French  
President Nicolas Sarkozy.

And a US spokesman said the Obama administration was not going to  
"negotiate some specific economic commitment" in London but would  
focus on the need for concerted future action.

White House spokesman Robert Gibbs said the US had already agreed a  
massive stimulus package, which was approved by Congress last month.

Finance ministers will discuss the UK's agenda for April's summit.
The UK wants reform of international institutions such as the IMF, a  
new "early warning system" to prevent future financial shocks and  
commitments that free trade will not be undermined.

But opposition parties are unconvinced about what the G20 meeting  
will achieve.

The Lib Dems said proposed reforms were like "shutting the stable  
door after the horse has bolted" while the Conservatives have  
continued to press for a government apology for past regulatory  
failures.

The UK and German governments have not always seen eye to eye over  
how to respond to the recession.

German finance minister Peer Steinbruck caused controversy in  
December when he criticised UK policies such as the VAT cut.

But Mr Brown has insisted the two countries are on the same path,  
with Germany launching its own stimulus package