PITTSBURGH – The leaders of the world’s largest economies begin two days of meetings Thursday hampered by different agendas as they seek a common approach to advance a fledgling economic recovery and prevent new financial meltdowns.
That recovery, though, may undermine prospects for any dramatic agreements. With the global economy improving, the appetite for a global financial overhaul appears to be fading.
Major issues that leaders gathering here are expected to tackle include capping bankers’ bonuses, overhauling financial regulation and plotting a future course for sustainable growth.
The gathering, which follows G20 meetings last November in Washington and this past April in London, includes older industrial powers along with major fast-growing developing economies such as China, India and Brazil.
President Barack Obama and his wife, Michelle, were greeting their guests at a dinner Thursday at Pittsburgh’s Phipps Conservatory and Botanical Gardens.
For some, the meeting comes at a delicate time: German Chancellor Angela Merkel faces an election at home on Sunday, and Japanese Prime Minister Yukio Hatoyama has been in office just over a week.
Merkel warned Thursday that leaders should not focus on stimulating economic growth at the expense of earlier pledges to reform global financial markets.
“We must not search for substitute topics and, beyond that, forget financial market regulation,” Merkel told reporters at her office before leaving for Pittsburgh. “Politicians must have the courage to do something that will not be immediately welcomed by all banks.”
British Prime Minister Gordon Brown said he hoped that leaders at the G20 will agree to a new “compact” on jobs and growth. He said loose fiscal and monetary policy measures should not be reversed too soon.
“The recession is not automatically over,” Brown said.
Obama wants the G20 to agree to a new global framework that would force countries to radically change how they manage their economies and restrain dangerous imbalances that range from massive trade surpluses in countries like China, Japan and Germany, to massive trade deficits in the countries like the United States.
Mike Froman, a top economic adviser to Obama, told reporters the administration hopes world leaders will agree on a framework that can “avoid the sort of imbalances that contributed to this crisis.”
Many economists believe that it is such imbalances that helped bring about the world’s economic troubles. However, China is resisting the rebalancing plan, fearing that it could be used to attack its trade surplus policies.
U.S. officials expect no binding, treaty-like language. But Froman said they hope for some type of process “for holding each other accountable, reviewing each other’s actions.”
The U.S. president is hoping to mollify China by pushing to give it and other emerging economies a bigger voice in the International Monetary Fund. The G20 has agreed in principle, but European governments, worried about losing influence that a board seat brings, might resist the plan in practice.
The G20 leaders have promised to adopt rules that would curb the kind of risky practices many believe prompted the current crisis. But there, too, opinions on how to go about it differ.
The United States is pushing a proposal to require banks to hold larger amounts of capital, the reserves they use to protect themselves against losses.
The Europeans are pushing a different approach: Germany’s Merkel and French President Nicolas Sarkozy have sought caps on excessive bonuses paid to bankers, which they say reward risky behaviour.
France has moved to curb huge bonuses to its bankers, and is urging the other G20 nations and the European Union to follow suit so the French banking industry is not at a professional disadvantage.
The French president made yet another push for the measure Wednesday in a speech to world leaders at the United Nations, and condemned “the behaviour of those who still continue to grow indecently rich, after leading the world to the brink of disaster.”
Italian Premier Silvio Berlusconi has said that while he is in favour of capping the bonuses, it is not a priority. Instead, he is urging transparent rules to fight financial speculation and market manipulation.
In a letter to Obama released on the eve of the meeting, Berlusconi and Australian Prime Minister Kevin Rudd said market volatility, particularly in commodities prices, had hurt people around the world and remains a threat to global economic growth.
And while the United States has urged G20 countries not to scale back stimulus spending programs just yet, it will be hard to maintain such a stance in light of recent improvements in all the major economies.
On the issue of climate, Obama indicated he would use the G20 summit to call for an end to extensive government subsidies that encourage the use of fossil fuels, such as oil, coal and natural gas, which are blamed for contributing to global warming. He will propose their gradual elimination, with the length of time to be determined, according to White House officials.
Many countries, including the United States, provide tax breaks and direct payments to help produce and use oil, coal, natural gas and other fuels that spew carbon dioxide, the chief greenhouse gas. However, this proposal was likely to spark opposition from China and possibly some other major greenhouse gas emitters including India and Russia.
Most of the G20 leaders are coming to Pittsburgh from New York where they gathered first for the opening of the U.N. General Assembly. The choice of venue is interesting: Pittsburgh, a western Pennsylvania city devastated by the collapse of the steel industry in the 1980s, has revived and fared relatively well during recession, mostly on the strength of high technology and health care.
The summit is expected to draw protesters from around the world.
As some leaders began arriving, police said 14 members of the environmental group Greenpeace were arrested on two bridges. They faced various charges, including possession of an instrument of a crime, disorderly conduct, conspiracy and obstruction.
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Associated Press writers Tom Raum, Mark Scolforo, Charles Babington and Emma Vandore in Pittsburgh, Seth Borenstein in Washington and Pan Pylas, Peter Spielmann and Michael Fischer in New York contributed to this report.
