Faced with the most serious global financial meltdown since the Great Depression in the 1930s,world leaders vowed on Saturday to undertake coordinated actions to revive the global economy and reshape the financial architecture to prevent similar calamities in the future.
BRETTON WOODS II
"We are committed to advancing the reform of the Bretton Woods Institutions so that they can more adequately reflect changing economic weights in the world economy in order to increase their legitimacy and effectiveness," said the leaders in a declaration issued at the G-20 summit on financial markets and world economy.
"In this respect, emerging and developing economies, including the poorest countries, should have greater voice and representation," the declaration said. "The Financial Stability Forum (FSF) must expand urgently to a broader membership of merging economies."
The International Monetary Fund (IMF), in collaboration with the expanded FSF and other bodies, should work to better identify vulnerabilities, anticipate potential stresses, and act swiftly to play a key role in crisis response, said the leaders.
The Washington summit, held amid serious challenges to the world economy and financial markets, was the first one for the G-20 since it was founded 1999 in the wake of the Asian financial storm which hit in 1997.
The current financial crisis, much more serious than that in 1997, has reshaped the economic map. And leaders of emerging economies called for a complete overhaul of the world's financial institutions to give the developing and emerging economies a greater voice and representation in the world financial system.
In a rare show of unity, the so-called BRIC club of fast-growing emerging economies -- Brazil, Russia, India and China-- issued a joint statement last week calling for a heftier role in shaping the new global financial architecture.
"We are talking about the G20 because the G8 doesn't have any more reason to exist, in other words, the emerging economies have to be taken into consideration in today's globalized world," Brazilian President Luiz Inacio Lula da Silva told reporters gathered at the summit.
"The existing multilateral organizations and the international rules in place were rejected by history. Both the IMF and the World Bank should open themselves to bigger participation of developing economies," said the Brazilian president, whose country currently holds the rotating leadership of the G-20. "This means more of a voice, representation and a vote for developing countries."
U.S. President George W. Bush voiced his support, saying he believes it is necessary to reform the current financial system in a "Bretton Woods II" overhaul.
"One of the key achievements was to establish certain principles and take certain actions for adapting our financial systems to the realities of the 21st century," said Bush, noting that part of the regulatory structures that are in place were 20thcentury regulatory structures. "And obviously, you know, the financial industry went way beyond them."
Britain, which will chair the G-20 starting January, deemed the summit a start of the "road to the new Bretton Woods," referring to the 1944 meeting in New Hampshire, the United States, where the international monetary protocols were created to govern trade, banking and other financial relations among nations.
"There is a clear determination on the part of world leaders in every continent to take necessary action to move economies out of this difficult period," British Prime Minister Gordon Brown said.
"I was very happy with the results of the summit," said European Commission President Jose Manuel Barroso at a joint press conference with French President Nicolas Sarkozy on Saturday. "It has laid the foundation for the future."
EMERGENCY RESPONSE
At the Washington summit, the leaders also agreed to an action plan of immediate and medium-term measures to cope with the current global financial crisis.
"Economic momentum is slowing substantially in major economies and the global outlook has weakened," warned the leaders.
"Many emerging market economies, which helped sustain the world economy this decade, are still experiencing good growth but increasingly are being adversely impacted by the worldwide slowdown," it said.
Against this background of deteriorating economic conditions worldwide, the leaders agreed that a broader policy response is needed, based on closer macroeconomic cooperation, to restore growth, avoid negative spillovers and support emerging market economies and developing countries.
As immediate steps to achieve these objectives, as well as to address longer-term challenges, the leaders said they will:
-- Continue their vigorous efforts and take whatever further actions are necessary to stabilize the financial system.
-- Recognize the importance of monetary policy support, as deemed appropriate to domestic conditions.
--- Use fiscal measures to stimulate domestic demand to rapid effect, as appropriate, while maintaining a policy framework conductive to fiscal sustainability.
-- Help emerging and developing economies gain access to finance in current difficult financial conditions, including through liquidity facilities and program support. The leaders stress the IMF's important role in crisis response, welcome its new short-term liquidity facility, and urge the ongoing review of its instruments and facilities to ensure flexibility.
-- Encourage the World bank and other multilateral development banks (MDBs) to use their full capacity in support of their development agenda, and the leaders welcome the recent introduction of new facilities by the World Bank in the areas of infrastructure and trade finance.
-- Ensure that the IMF, the World Bank and other MDBs have sufficient resources to continue playing their role in overcoming the crisis.
The joint efforts were immediately welcomed by the international organizations' leaders who are concerned that the economic crisis could become a human crisis.
"The Secretary-general welcomes the Declaration of the Summit on Financial Markets and the World Economy, held in Washington D.C. today, which committed leaders to joint action," said a statement from UN chief Ban Ki-moon's office.
He hailed the stimulus programs as an opportunity to promote "green economic development," and expressed support for renewable energy, conversion to more carbon-friendly systems, and investing in climate change adaptation measures in the most vulnerable developing economies.
HUMAN CRISIS
Calling for a rapid response to the spreading global financial crisis, many countries warn that the international community must not lose sight of the human crisis triggered by the financial crisis.
Sharply tighter credit conditions and weaker growth are likely to cut into some developing countries' revenues and their ability to invest to meet education and health goals, as well as the infrastructure expenditures needed to sustain growth.
Current estimates suggest that a one percent decline in the growth rates of the developing world pushes an additional 20 million people into poverty. Already, 100 million people have been driven into poverty as a result of high food and fuel prices, according to the World Bank.
Ban Ki-moon said his greatest concern "is that today's financial crisis should not evolve into tomorrow's human crisis."
"We cannot allow it to become a reason for neglecting other critical issues: unacceptable levels of poverty and hunger, the food crisis, climate change," said Ban on Friday. "For that will only exacerbate the already fragile political and security situation in many countries that hardest hit."
After the five-hour summit, the leaders endorsed such calls in general terms.
"We are mindful of the impact of the current crisis on developing countries, particularly the most vulnerable," said the leaders. "We reaffirm the importance of the Millennium Development Goals, the development assistance commitments we have made, and urge both developed and emerging economies to undertake commitments consistent with their capacities and roles in the global economy."
The leaders also promised to address other critical challenges such as energy security and climate change, food security, the rule of law, and the fight against terrorism, poverty and disease.
But some leaders also said it is important to turn words into deeds.
"This summit of G20 leaders and the G20 meeting of finance ministers last weekend have begun to lay a productive foundation of discussion, input, and agreement," said World Bank President Robert Zoellick in a statement released after the summit.
But "what matters now are the follow-up actions. People are looking to leaders for a global, coordinated and fast response," he said.
"But the poorest developing countries must not be left out in the cold. We will not solve this crisis, or put in place sustainable long-term solutions by accepting a two-tier world," warned the World Bank chief. "If we are going to avert a human crisis, we will have to do more."
Source:Xinhua
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