World

World leaders agree on broad principles to calm economic waters

WASHINGTON — World leaders, who gathered here to tackle the ongoing global financial crisis, agreed to a broad range of solutions Saturday but left the details to be worked out until the spring.

The summit of the Group of 20, which represents 19 countries and the European Union, called for a range of new regulations of financial institutions, credit rating agencies and other bodies widely blamed for sparking the gravest global economic crisis in decades.

The summit also demanded that large developing economies such as Brazil's and China's be given more say in the operation of institutions such as the International Monetary Fund that many complain are dominated by the United States and other industrial nations.

Despite the event's hoopla, a joint declaration issued by the meeting's participants Saturday afternoon was heavy on generalities such as the need for more coordinated global action, financial transparency and tighter economic regulations. It gave leaders until the next summit to be held by April to fill in the blanks.

The declaration did list some more immediate priorities such as creating a supervisory "college" for all major cross-border financial transactions and having each country launch a financial sector assessment program that will inspect its regulatory system.

The declaration also called for a system to clear the issuance of credit default swaps, which are insurance policies against bad financial bets now sold in unregulated markets.

The overall message from the summit held at the National Building Museum here was that an overly careless attitude toward financial risk and unregulated, new-fangled financial instruments were the culprits behind the current economic turmoil.

"Weak underwriting standards, unsound risk management practices, increasingly complex and opaque financial products, and consequent excessive leverage combined to create vulnerabilities in the system," the declaration read.

President George W. Bush and French President Nicolas Sarkozy called the summit a success while noting that coming up with lasting solutions to the broken global economy will take months if not years.

For some, that could be too late.

The World Bank is projecting 1 percent global economic growth next year, with developed economies projected to contract by .1 percent. This past week, Germany became the latest country to enter into recession.

"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," Bush told reporters after the meeting. "Part of the regulatory structures that are in place were 20th century regulatory structures. And obviously, you know, the financial industry went way beyond them."

Sarkozy, who suggested the need for the summit in late-September, called the meeting "historic" and said leaders had made real accomplishments such as reaching consensus that nations and lending bodies needed to quickly spend money to stimulate economies.

Like Bush, Sarkozy warned against interfering with free markets.

"We all talked about new regulations of financial markets," Sarkozy said at a news conference after the summit. "But that doesn't mean too much regulation. We won't shift from one end to another."

With Bush about two months from leaving office, many leaders may have been reluctant to make any specific agreements during the summit, observers said.

President-elect Barack Obama did not attend the meeting but sent former Clinton administration Secretary of State Madeleine Albright and former Republican Congressman Jim Leach to meet with leaders in his stead. Bush said Obama had been kept abreast of the discussions.

Both Bush and Brazilian President Luiz Inacio Lula da Silva said stimulating world trade would be key to climbing out of the economic quagmire, with both presidents calling for the conclusion of the long-stalled Doha Round of global trade talks — World Trade Organization sessions originally designed to reduce tariffs and ease trade.

"(Concluding Doha) would represent a decision of coordinated global action that would inject confidence in the markets and would counter the rise of protectionist tendencies," Lula da Silva said at the summit, according to prepared remarks.

The Brazilian president's message, however, was also a bitter one, as he noted how developing economies had been hit by problems starting with the U.S. mortgage meltdown.

"There's been an excess of advice, of supposed specialists, for poor and developing countries," Lula da Silva said. "This same advice was lacking for rich countries, in spite of the signs of financial chaos that became louder over time."

Russian President Dmitry Medvedev echoed other leaders in calling for a new financial "architecture" that would involve a more diverse range of economic players.

The summit showed off that increasingly diverse global economy, with countries such as Argentina and India and South Africa attending along with heavy hitters such as Germany and Japan.

Medvedev also suggested establishing more reserve currencies to replace the currently dollar-dominated system, which was a suggestion also voiced by Sarkozy.

However, the French president warned against remaking the world financial hierarchy while economies were still crumbling.

"We're all in this together," Sarkozy said. "We all only pull out of it together."

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