World leaders are poised to approve a greater voice for Asian countries, surging on the world’s economic stage that could come at Europe’s expense. But European leaders also are expected to secure one of their top priorities — a limit on bankers’ bonuses.
The leaders of the world’s 20 largest economies on Thursday kicked off a two-day meeting dedicated to fostering a healthy global recovery with a historic shift recognising the rising influence of countries such as China, South Korea and India.
The leaders decided the G20 will serve as the board of directors on global economic cooperation, a function that for more than three decades had been performed by a smaller club: the U.S., Japan, Britain, Germany, France, Italy, Canada and later Russia.
The G8 will, however, continue to meet on matters of common importance such as national security. President Barack Obama initiated the move, to be announced on Friday, according to a White House official who spoke on condition of anonymity.
The measure underscores how the world’s balance of power has shifted since a small club of wealthy, industrial countries began meeting in the mid-1970s in an effort to respond to oil shocks, stagflation and other economic crises of that period.
The leaders trickled into Pittsburgh throughout the day — most of them in from New York, where they attended the opening of the U.N. General Assembly. Later, they gathered with their spouses for a welcoming reception at a botanical reserve, before parting for separate banquets on Thursday night.
The summit was marred by protests as police clashed with demonstrators who rolled trash bins and threw rocks. Police said 17 to 19 people were arrested, but there were no reports of injuries.
U.S. Treasury Secretary Timothy Geithner cited progress on several fronts, most notably the bankers’ salaries issue, with strong support from France and Germany. EU leaders had called for links between bankers’ pay and the companies’ long-term performance and have sought to end bonuses where a banker is paid a set amount regardless of the risk being taken.
Mr. Geithner said the G20 countries had reached a consensus on the “basic outline” of a proposal to limit bankers’ compensation by the end of this year. He said it would involve setting separate standards in each of the countries and would be overseen by the Financial Stability Board, an international group of central bankers and regulators.
His comments came shortly after European Commission President Jose Manuel Barroso again pressed for the limits.
“Europeans are horrified by banks, some reliant on taxpayers’ money, once again paying exorbitant bonuses,” Mr. Barroso said. “It is important we take action.”
On Friday, a government spokeswoman in Beijing said China planned to link the pay of bankers to risks taken by their institutions, but was not looking at salary caps.
Mr. Geithner predicted the proposed crackdown on bankers’ bonuses would be in place by the end of the year.
German Chancellor Angela Merkel also said she was optimistic that far-reaching agreements are possible in Pittsburgh. She warned against focusing too much on imbalances in the world economy, but added, “I think we have a chance to reach progress in all important fields.”
Mr. Geithner also said summit partners would endorse the broad outlines of a proposal, supported by Mr. Obama, to deal with huge imbalances in the global economy — such as large trade surpluses in China and record budget deficits in the United States.
He then reached out to China and said the U.S. supports the Asian country’s efforts to gain greater voting rights in the International Monetary Fund over the reservations of European nations, who would lose influence.
Given the rise of China’s economic powers, “it’s the right thing,” and Europe recognises that, Mr. Geithner said.
China, meanwhile, seemed to downplay growing trade tensions with the United States, saying the two trading partners must focus on long-term relations and settle their differences through friendly talks.
Yu Jianhua, director-general of the Commerce Ministry’s International Trade Department, also told reporters on the sidelines of the Group of 20 economic summit that world leaders should “firmly reject trade protectionism.”
His comments come a week after Beijing filed a World Trade Organization challenge to Washington’s decision to raise tariffs on imports of Chinese-made tires. This week, a U.S. labour union and three paper companies announced they had filed a new trade complaint over imports of Chinese paper.
The Pittsburgh summit marks the third time within a year that the G20 leaders have met to deal with the global financial meltdown.
Differences still remained on tactics, including how quickly to move away from full-bore economic stimulus policies.
Washington wants the group to agree to a “framework for sustainable and balanced growth” that could include monitoring by a group such as the International Monetary Fund that could detect policies that could lead to global imbalances.
British Prime Minister Gordon Brown said he hoped the group would agree to a new compact on jobs and growth. He warned, as Mr. Obama has, that nations should not move too quickly to end low-interest rates and stimulus spending packages.
Mr. Obama argues that the global economy cannot continually rely on huge borrowing and spending by Americans and massive exports by countries such as China.
The two-day summit was to end on Friday with a joint communiqué likely to paper over many remaining disagreements.
