G-20 leaders want tighter control on markets to ride out crisis, Bush differs

By Michael McKee  |   2008-11-15  |     NEWSPAPER EDITION

A TWO-DAY summit on the global economic crisis began in Washington with world leaders set to agree a little more than trying to spend their way out of a global recession.

The Group of 20 heads of state are divided on what needs to be done after that. European leaders are demanding greater state controls over financial markets. President George W. Bush, who hosted a dinner of his counterparts at the White House, takes a narrower view.

Increased government spending on economic stimulus is something most of the industrialized and developing nations that form the G-20 are already planning to do. Any shift toward substantive change to the international financial system will probably wait for another meeting after President-elect Barack Obama takes office.

"The most realistic outcome is an agreement to start putting in place principles for reforms, and then agree to meet again," said Brad Setser, an economist at the Council on Foreign Relations and former United States Treasury official.

Leaders of the G-20, who represent almost 90 percent of the world economy, are feeling the pressure with stock markets tumbling and economists forecasting the deepest global recession in three decades.

Statistics published within the last 24 hours showed deterioration in economies around the world. The 15-nation euro area fell into its first recession in 15 years the number of Americans collecting jobless benefits jumped to a 25-year high and Chinese industrial production gained last month at the slowest pace in seven years. The Organization for Economic Cooperation and Development predicted the economies in its bloc of 30 rich nations would contract next year by 0.3 percent.

Fresh strategy

The US president invited the G-20 leaders to Washington for their first-ever summit in response to calls from French President Nicolas Sarkozy and UK Prime Minister Gordon Brown for a discussion of the causes and possible cures of the financial crisis.

Bush's European guests want a more international approach to market regulation with curbs on executive pay and hedge funds as well as greater cross-border supervision of banks.

German Chancellor Angela Merkel yesterday said she'll do "everything to ensure that there are more rules to prevent us from ever having to face such a situation again."

One possible compromise is adopting Gordon Brown's suggestion for a network of international regulators who meet to monitor banks that have significant interests in multiple economies.