G-20 Summit Agrees On Direction For Dealing With Global Financial Crisis

Having publicly and passionately defended the free enterprise system, or capitalism, prior to the weekend, U.S. President George W. Bush declared the weekend’s activities to have been an “extraordinarily successful summit”. With only two months left of his term, President Bush, whose approval ratings show him to be one of the least popular presidents in U.S. history, may yet be remembered as the president who halted an apparent attack on capitalism, while laying foundations for global financial reform and orchestrating the first wide-ranging international measures, as agreed upon with leaders of major emerging economies and industrialized nations, to tackle the current global financial crisis.

The plans agreed on at the summit include possible economic stimulus packages, interest rate cuts by world-wide central banks and assistance for developing countries that are struggling to cope with the crisis, which may entail channeling more funds to the International Monetary Fund (IMF). The enormous, largely unregulated, market of credit default swaps came under the spotlight, with calls for swift action to minimize the risk of these complex financial instruments, which many believe pose a threat to financial stability. It was agreed not to raise new trade barriers in the next twelve months and to settle unresolved issues relating to the 2001 Doha trade talks aiming at liberalizing international trade policies. Existing global organizations, such as the IMF and the financial Stability Forum, will be called upon to play a larger role in the current financial crisis, as well as assisting in identifying potential risks in the future. Regulatory agencies, which some analysts have blamed for not stopping the situation before it reached crisis proportions, would be more strictly monitored.

The urgency of the crisis has been underscored by the official announcement on Friday that the 15-nation European Union has entered into a recession, and on Monday 17 October, Japanese government officials announced that Japan, the second largest economy in the world, is in a recession. Prime Minister of Japan, Taro Aso, was among the world leaders at the G-20 summit, as were leaders of the European Union countries. G-20 members are: Argentina, Australia, Brazil, Britain, Canada, China, European Union, France, Germany, India, Indonesia, Italy, Japan, Mexico, Russia, South Africa, Saudi Arabia, South Kora, Turkey and the United States.