On streets of London violent clashes are timed to coincide with the G20 economic summit in London,repeatedly clashing with police in the narrow streets of London’s financial quarter on what protesters designated “Financial Fools Day”.Demonstrators held banners and flags in a good natured and boisterous protest near the ExCel Centre where leaders from top industrialised and emerging economies were meeting to agree on a response to the world’s worst financial crisis since the 1930s.Protesters chanted, No more war,against the wars in Iraq and Afghanistan, conflict in Ethiopia and the greed blamed by many for the economic crisis.
“Abolish all nukes, yes we can,” said one banner. “We won’t pay for their crisis”, read another.Security for the gathering of world leaders, who included U.S. President Barrack Obama, was intense. Many roads near the conference centre were closed and police launches patrolled nearby waterways. Weheras the Indian Prime minister Dr Manmohan Singh partly blamed International Monetary Fund for the current global economic crisis.Briefing the press at G20 leaders’ summit in London he said the G20 declaration will fulfil the aspirations of the developing nations. World leaders on Thursday agreed to pledge $1 trillion more to the International Monetary Fund and other institutions to tide over the worst financial crises in six decades, bringing with it the promise of a greater role for emerging economies like India in the running of the global financial system.

The leaders also agreed to negotiate a speedy conclusion of the Doha trade round and put some $250 billion more for trade finance, both of which were key demands from India, represented by Prime Minister Manmohan Singh.

“We have reached some big, important conclusions,” British Prime Minister and the chair of the G20 summit Gordon Brown said after the leaders concluded their in-camera talks at the ExCel Centre in east London on the bank of Thames, away from the glare of protesters.
Out of $1 trillion pledged for various institutions, $250 billion will be given to the IMF to lend at cheaper rates to needy countries in the form of special drawing rights
British prime minister said with the decisions reached Thursday, some $5 trillion will be spent by the member countries of G20, that account for nearly 85 percent of the global output and two-thirds of the population.

The G20 leaders also agreed to bring an end to tax havens’ jurisdictions that allow people to park their funds hiding behind strict banking secrecy laws, as also those that have extremely loose regulation for the financial sector.

“Banking secrecy must come to an end,” Brown said at the press conference, adding the G20 leaders have committed themselves to ensuring such countries and jurisdictions are not allowed to carry on with the old models.

Besides India, Britain and the US, the G20 comprises Argentina, Australia, Brazil, Canada, China, France, Germany, Indonesia, Italy, Japan, Mexico, Russia, Saudi Arabia, South Africa, South Korea, Turkey and the EU. Dr. Singh noted that the downturn was much deeper than they had thought at last November’s Washington summit, calling for stronger concerted action.

The restoration of the banking system in the industrial countries was a precondition for successful revival. Active contra-cyclical policy must be a priority item and the International Monetary Fund had estimated that a discretionary fiscal stimulus of 2 per cent of the GDP would be needed in 2009 and again in 2010. While the actual stimulus of the G20 countries in 2009 met the Fund target, the amounts planned for 2010 might be too little.

Touching on the situation in India, he noted that the growth rate will fall from close to 9 percent in the last five years to below 7 percent in 2008-09 and to a similar figure in 2009-10.

India had made aggressive use of monetary and fiscal policies, and the total fiscal stimulus would be almost 4 percent of the GDP. The country had gained a great deal from effective regulation of the banking system.

While the current account deficit would rise to 1.4 per cent of the GDP, the country would be able to finance this without difficulty and in any case it could draw on the foreign exchange reserves.

Dr. Singh called for a $500 billion increase in the resources available with the IMF over the next two years as an interim measure pending review of the quotas.

The next review of the quotas due in 2013 needed to be advanced and the quotas at least doubled. They also needed to agree on a fresh allocation of Special Drawing Rights (SDRs) of $250 billion, which would provide developing countries with about $80 billion of usable resources.

The Prime Minister called for a stronger regulation and improved supervision of the financial system if they were to prevent a repeat of the crisis.

The perimeter of regulation needed to be expanded to cover the non-banking sector, steps to redefine capital requirements, to avoid a build up of excessive leverage and to subject systemically important institutions to supervision by a college of supervisors. “We should also endorse sharing information and bringing tax havens and non-cooperative jurisdictions under closer scrutiny,” he said.
Sphere: Related Content