G20 Agrees on Ways to Prevent Future Economic Crisis

The Group of 20 (G20) major economies have agreed to implement tighter financial regulations designed to help prevent the types of investment and trading practices that led to the global financial crisis, and they pledged to achieve more sustainable and balanced economic growth.

Speaking to reporters in Seoul in a press conference following the conclusion of the  G20 meetings, All the world leaders and President Obama said, “For the first time, we spelled out the actions that are required … to achieve the sustained and balanced growth that we need.”

G20 leaders agreed that countries with large trade deficits must work to reduce them, while those with large trading surpluses “must shift away from unhealthy dependence on exports and take steps to boost domestic demand,” Obama said.

The president said he is prepared to make “tough decisions” in order for the United States to cut its trade deficit in half by 2013. He added that the United States is also working to make its economy grow through investments in infrastructure, education, research and clean energy.

The G20 also agreed that “exchange rates must reflect economic realities,” with major advanced economies needing to stabilize their reserve currencies, while emerging economies, including China, need to “allow for currencies that are market driven,” he said.

“Letting currencies reflect market fundamentals, allowing your currency to move up and down, depending on the role that you’re playing in the international trading system, is the best way to assure that everybody benefits from trade rather than just some,” the president said.

The meetings also resulted in an agreement on new standards for financial regulation. Obama said the United States is reforming its financial system by ensuring that banks “have the capital they need to withstand shocks and not take excessive risks that could lead to another crisis,” as well as not asking U.S. taxpayers to pay for future bank failures, he said.

According to a November 12 White House fact sheet on U.S. financial reform and the G20 leaders’ agenda, the G20 agreed that if a large financial institution is failing, “it will only have one fate: liquidation” in a safe and orderly manner, rather than rescue by taxpayers.

New standards on the quality of bank capital and excessive leveraging will also “markedly reduce banks’ incentive to take excessive risks, lower the likelihood and severity of future crises, and enable banks to withstand – without extraordinary government support – stresses of a magnitude associated with the recent financial crisis,” the fact sheet says.

Obama said there was also agreement that development is a “key driver of economic growth” and “the most effective means of lifting people out of poverty,” while in some countries corruption constitutes “the single greatest barrier to economic progress.”

In addition, the G20 also reaffirmed the need to avoid protectionism, which the president said “stifles growth” and instead pursue trade and investment through open markets.

The fact sheet quotes the G20 communiqué as saying the world’s largest economies “must take care not to spur a return of the practices that led to the crisis,” and that when fully implemented “steps we are taking here … will result in a fundamentally stronger financial system than existed prior to the crisis.”

Short URL: http://theasiantimes.com/?p=395

Posted by on Nov 13 2010. Filed under Americas, Asia, Headlines, World News. You can follow any responses to this entry through the RSS 2.0. You can leave a response or trackback to this entry

Leave a Reply

The text you want to show on mouse roll-over

Photo Gallery

The text you want to show on mouse roll-over