G20 is split over exiting stimuli, banking reforms

G20 is split over exiting stimuli, banking reforms

SPLIT WIDE OPEN: Britain’s Prime Minister Gordon Brown addressing the G20 finance ministers meeting at St Andrews, Scotland, on Saturday. To his right is British Treasury Chief Alistair Darling. AP

Differences over exiting economic stimuli and reforming banking system are threatening to derail efforts of Finance Minister Pranab Mukherjee and his G-20 counterparts as they met, on Saturday, in Scotland to pursue an agenda of sustainable economic growth.

Host Britain, still in the grip of recession, is keen to continue global effort to support recovery. Others, including the US, Japan and Germany, want to debate ending the massive government spending, low interest rates and expansion of the money supply measures employed to boost growth.

There are disagreements on banking reform, with Canadian Finance Minister Jim Flaherty acknowledging on the eve of the meeting that there were “disparate views” on how to address the problem of banks being too big to fail. France is pressing for more actions to stop excessive bonuses in the banking sector.

Addressing the finance ministers and central bankers from the 20 rich and developing nations, Britain’s Chancellor of Exchequer Alistair Darling wanted them to agree on a financial package to help poorer nations develop green industries. The EU, which has agreed to a Euro 100-billion annual package of public and private finance by 2020, is urging the US to lay out its position.

With the major UN climate conference in Copenhagen a month away, he said “heavy lifting” was needed to push through a deal on so-called climate finance.

Impose global levy

Meanwhile, Britain threw its weight on Saturday behind proposals to impose a global levy on banks to fund future bailouts and called on the G20 to work toward a $100 billion deal to meet the cost of climate change.

British Prime Minister Gordon Brown urged finance ministers and central bankers from the group of leading nations to consider the bailout fund urgently, as they met in Scotland to discuss a new framework to rebalance the global economy.

France and Germany have for some time been in favour of looking at a levy but London with its huge financial centre has always resisted.

“We should discuss whether we need a better economic and social contract to reflect the global responsibilities of financial institutions to society,” Brown said. Washington, which has also traditionally been opposed to any global tax, had no immediate comment.

Last week the French also said they were exploring a tax on financial transactions to help bridge the divide between rich and poor countries on how to finance climate change.

The tax could raise 20 billion euros a year which would be used to fund renewable energy projects in the poorest countries.

Finance ministers and central bankers are also expected to maintain their pledge to keep emergency economic support packages in place for now and come up with a new framework to ensure closer policy coordination and rebalance the global economy.

“The agreement you are explicitly discussing commits G20 countries for the first time to set objectives; to assess how our individual policies for economic development fit together; to evaluate whether these will deliver our objectives; and judge if further action is needed,” Brown told the G20 ministers and central bankers.

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