The Group of 20 rich and developing countries are expected to commit to further efforts to boost growth after holding talks here on Saturday, despite fledging signs of an economic recovery.
The G-20 nations are also likely to pledge restrictions on excessive bankers' pay in a bid to address concerns about the risk-promoting bonus culture blamed for fuelling the current crisis - although they are expected to stop short of some of the tougher measures wanted by European governments.
“We meet at a critical juncture for co-operation in the global economy,” Mr. Brown told officials from countries representing 80 per cent of the world's output at the start of talks on Saturday.
“The G-20 needs to agree [to] a clear and unambiguous mandate for the G-20 to give priority to the resumption of global growth and to help countries achieve sustainable growth going forward,” he added.
The International Monetary Fund has said that the global economy is beginning a sluggish recovery from its worst recession since World War II, raising its estimate for global economic growth in 2010 to 2.5 per cent, from an April projection of 1.9 per cent. But the IMF also downgraded its forecast for this year to a contraction of 1.4 per cent, from 1.3 per cent. Japan, Germany, France and Australia all recorded growth in the second quarter. Other countries like Britain, which is expected to move back into growth in the third quarter, have been slower to recover.
There has been a strong consensus among the G-20 for the need to continue with the trillions of dollars worth of extraordinary stimulus packages that have been pumped into the ailing world economy in recent months.
Withdrawing any time soon from measures such as Britain's multibillion asset purchasing program to expand the money supply and the U.S. capital injection into struggling companies such as General Motors could result in a double-dip recession, they say.
Germany and France had previously pushed for more discussion of a so-called exit strategy from the massive stimulus measures, arguing that spending measures have taken government debt to dangerously high levels, but have backed away from the issue.
“Given the risks we face, this is not the time for economic complacency or overconfidence, the stakes are simply too high to get these judgments wrong,” Mr. Brown said. “To decide now that it is time to start withdrawing and reversing the exceptional measures we have taken would in my judgment be a serious mistake.” The G-20 is also discussing reform of the global financial architecture, with the hot topic of bankers' bonuses dominating talks.
European countries, headed by France and Germany, have called for a cap on bonus payments, but that is unlikely to be agreed after open opposition from Britain and a lukewarm reception from the United States.
The group's communique, due later Saturday, is instead expected to be restricted to measures linking bonuses to base compensation, while also allowing them to be clawed back if performance does not match pay. The G-20 are also likely to require banks to disclose the pay of their top earners.
A final deal on bank bonuses is not expected until the G-20 leaders’ summit in Pittsburgh on Sept. 24-25.
The United States has tried to put the focus of the London meeting, which is a preparatory gathering for the leaders’ summit, on boosting bank reserves.
The U.S. proposal for a new international accord to increase banks' capital reserves would establish stronger international standards for the reserves banks are required to hold to cover potential loan losses.
The U.S. Treasury Secretary Timothy Geithner wants to reach agreement on an accord by the end of 2010, with countries agreeing to implement the plan by the end of 2012.
Mr. Brown also called on G-20 nations to toughen action against tax havens and “commit to what sanctions we are going to take and implement by March next year.”
Britain, France and Germany have vowed to clamp down countries that help tax evasion by refusing to share information. The sanctions they want would include cutting investment, taxes on funds held in tax havens and withdrawing development aid, Mr. Brown said in July.
Several countries -- including Switzerland and Liechtenstein -- have moved swiftly to swap more tax information with other authorities after the Organization for Economic Cooperation and Development put them on a “gray list” of tax havens that don't meet information exchange standards.
The G-20 includes 19 countries: Argentina, Australia, Brazil, Canada, China, France, Germany, India, Indonesia, Italy, Japan, Mexico, Russia, Saudi Arabia, South Africa, South Korea, Turkey, Britain and the United States. The European Union, represented by its rotating presidency and the European Central Bank, is the 20th member.
