LONDON – Doggedly optimistic in the face of doubts, U.S. President Barack Obama and British Prime Minister Gordon Brown predicted Thursday’s emergency G20 economic summit would produce a significant global deal to tackle the deepening worldwide recession.
Others weren’t so sure. France warned on Wednesday that neither it nor Germany would agree to “false compromises” that soft-pedal a need for tougher financial regulation to curb abuses that contributed to the spreading chaos. And outside the carefully scripted meetings, protesters smashed bank windows and pelted police with eggs and fruit.
Thousands surged into London’s financial district, blockading the Bank of England and breaking into a branch of the Royal Bank of Scotland. Elsewhere, however, inside the meetings, Obama said differences among the presidents and prime ministers of the Group of 20 rich and emerging countries, were “vastly overstated.”
“I am absolutely confident that this meeting will reflect enormous consensus about the need to work in concert to deal with these problems,” said Obama, who is under pressure to make a good showing in his first major international appearance.
Prime Minister Stephen Harper, also in London for the summit, said he would urge G20 leaders to “over-act” during deliberations on fixing the global economy.
“Let’s assume that we need dramatic action and let’s do it,” Harper said in an interview with CNN.
With economic chaos spreading, Brown, the host of the summit, predicted agreement on a co-ordinated strategy, including a possible $100 billion fund to finance global trade, tighter financial rules and action to support economic growth and job creation.
G20 leaders are also in general agreement on a plan to double the money available to the International Monetary Fund, to some US$500 billion, to help emerging countries.
Consensus on further measures is by no means clear.
Brown initially trumpeted the gathering as “a new Bretton Woods – a new financial architecture for the years ahead.” But the meeting so far bears little similarity to the 1944 New Hampshire conference where the eventual winners of the Second World War gathered to set postwar global monetary and financial order.
Washington has eased off on its push for other governments to pump more money into economic stimulus programs after heavy opposition from European countries, who contend their bigger social safety nets make more spending unnecessary.
Germany and France have instead campaigned for tougher rules to restrain financial market excesses.
That disagreement has lowered expectations for the London summit and weakened confidence in the world’s ability to quickly pull out of the downturn.
Global trade is plummeting, protectionism is beginning to make inroads and unemployment is rising.
French leader Nicolas Sarkozy, who had earlier implied he might walk out if key demands on tighter regulation were not met, presented a more conciliatory stance at a joint London news conference with German Chancellor Angela Merkel, saying he had “confidence in Obama.”
He still warned, however, that France and Germany would reject “false compromises” and considered concrete steps on tax havens, hedge funds and ratings agencies crucial.
Paris and Berlin want definitive agreements on a crackdown on tax havens and action on other regulatory issues, rather than simple commitments to reform. The summit is also expected to consider lightly regulated hedge funds and how to clear bank balance sheets of shaky securities.
Sarkozy said that “without new regulation there will be no confidence. it’s a major non-negotiable objective.”
Merkel said both she and Sarkozy had come to London “in a very constructive mood.” But she said, “We do not want results that have no impact in practice.”
Even free trade remains the subject of potentially bitter dispute.
In their meeting in November, the G20 members vowed to avoid protectionism that could stifle trade. But since then, 17 have acted to pass subsidies to protect their own industries or limit imports, according to the World Bank.
On Wednesday, leaders met in a series of bilateral meetings behind closed doors to try close the gap on key issues. They assembled for a formal dinner Wednesday evening before business meetings on Thursday.
Another growing concern for the conference is the plight of developing countries, amid growing fears that the heavy toll exacted by the global economic crisis on those countries could come with a heavy human and political toll.
UN Secretary General Ban Ki-moon has written to leaders to urge them to approve a $1 trillion stimulus plan for developing countries and urge the G20 countries to back away from damaging anti-trade policies.
It remains to be seen if the leaders will be able to avoid a repeat of the last time that London hosted a world economic summit – the 1933 World Economic Conference that tried to agree to plans to revive the global economy in the midst of the Great Depression.
Many commentators blame the collapse of that gathering – torpedoed in part by the recalcitrance of new President Franklin D. Roosevelt to make agreements that would restrict his freedom to act on the U.S. economy – for the subsequent erection of international trade barriers, continued competitive currency devaluation and rising unemployment.
