- The Washington Times - Thursday, April 2, 2009

Leaders at the G-20 summit in London declared that “a global crisis requires a global solution.” But that doesn’t mean they are in agreement on just what the solution should be.

Here is a look at what they promised in their joint communique and what the grand phrases really mean.


WHAT THEY SAID: “We are undertaking an unprecedented and concerted fiscal expansion, which will save or create millions of jobs which would otherwise have been destroyed, and that will, by the end of next year, amount to $5 trillion, raise output by 4 percent and accelerate the transition to a green economy.”

WHAT THEY MEANT: The words in the communique were strong but in reality the major countries did not pledge any additional efforts on government spending or tax cuts to boost their own economies.

Because of strong opposition from France and Germany, President Barack Obama was not able to achieve his goal of getting the other G-20 countries to commit to spending the equivalent of 2 percent of their domestic economy on stimulus efforts to boost jobs. That is a goal the United States has reached with the $787 billion two-year stimulus program Obama pushed through Congress.

The European countries argued that they had already made major commitments and did not want to risk exploding their own deficits the way the United States was doing. One European leader, Czech Prime Minister Mirek Topolanek, called U.S. deficit spending a “road to hell.”


WHAT THEY SAID: “Confidence will not be restored until we can rebuild trust in our financial system.”

WHAT THEY MEANT: Obama successfully deflected a push by France and Germany to create a “global regulator,” something that the administration believed would represent an unwelcome foreign intrusion into U.S. financial markets. However, the G-20 communique did call for tougher regulation in an effort to fill the gaps exposed by the current financial crisis, the worst to strike the global economy in decades. Many of the proposals track suggestions put forward by Treasury Secretary Timothy Geithner a week ago when he unveiled the administration’s financial regulatory overhaul proposals.


WHAT THEY SAID: “The era of banking secrecy is over.”

WHAT THEY MEANT: The G-20 agreed to work together to shut down global tax havens where investors hide their assets, depriving their home countries of billions of dollars in tax revenues. However, remains to be seen whether small countries that have benefited for years by operating such havens will respond to the increased pressure for more transparency.


WHAT THEY SAID: “We are determined to reform and modernize the international financial institutions to ensure they can assist members and shareholders effectively in the new challenges they face.”

WHAT THEY MEANT: The G-20 leaders pledged a significant expansion of resources for the International Monetary Fund and other international lending institutions _ a boost of more than $1 trillion. They’re not just writing a trillion-dollar check, though _ much of the support would be in the form of credit lines from the United States and other wealthy countries that the IMF could draw upon if the global crisis becomes more severe and greater resources are needed to prop up emerging economies. The harder part of the G-20 pledge may come in reforming the IMF and World Bank, where growing economic powers such as China have sought more of a say in running the institutions for more than a decade. Such reform has been elusive given strong resistance from European nations that would likely lose some of the voting strength they now wield.


WHAT THEY SAID: “We will not repeat the historic mistakes of protectionism of previous eras.”

WHAT THEY MEANT: The G-20 leaders repeated a pledge they made at their first summit last November in Washington to refrain from erecting new protectionist barriers during the current economic crisis. Economists see this commitment as critical to avoiding the mistakes that turned the downturn of 1929 into the Great Depression. Back then, country after country imposed trade barriers in an effort to protect domestic industries, only to see global trade plummet _ which left all nations harmed. The problem with this repeated pledge: By one estimate, 17 of the nations at the Washington meeting, including the United States, have already acted to protect domestic industries during the current downturn.

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