US$5 trillion war chest for economic crisis

LONDON – World leaders pledged a huge raft of new spending Thursday and a crackdown on tax havens and excess corporate pay to step up the battle against the economic crisis.

The Group of 20 summit said more than one trillion dollars would go to the International Monetary Fund and other finance and trade institutions helping struggling countries through the turmoil.
British Prime Minister Gordon Brown said that by the end of 2010 the Group of 20 developed and developing nations would have spent five trillion dollars fighting the crisis and hailed what he called the start of a ‘new world order’.
US President Barack Obama also called the London summit accord a hoped for ‘turning point’ but acknowledged there was no guarantee that the recession would not become depression.
Outside the summit, there was no repeat of Wednesday’s violent clashes by protesters angry at the economic crisis, but police made 32 arrests and four people were charged over an attack on a bank during the riots.
Obama said the G20 had agreed ‘an unprecedented set of comprehensive and coordinated actions,’ and stock markets shot up in response to the deal.
Even French President Nicolas Sarkozy, who had threatened to walk out of the summit, said the results were ‘more than we could have hoped for’. German Chancellor Angela Merkel said a ‘historic compromise’ had been made.
Before the summit, the United States and Britain had pushed for bigger stimulus spending while France and Germany had called for the focus to be put on greater regulation of the financial sector.
Neither side got everything they wanted.
The summit promised US$1,1 trillion of ‘resources’ for the IMF and other global finance bodies.
There will be US$500 billion of funding, 250 billion dollars in special drawing rights and 250 billion dollars in trade credit.
But much of the new funding has already been promised by individual countries, including 100 billion dollars each from Japan and the European Union.
After the summit, the Organisation for Economic Cooperation and Development published a list of ‘non-compliant’ tax havens which Brown said would face immediate action, adding that ‘we have agreed tough standards and sanctions for use against those who don’t come into line in the future.’
Costa Rica, Malaysia, the Philippines and Uruguay were among the countries named by the OECD as tax havens which had not made any commitment to respecting international standards on exchanging tax information.
Brown said there would also be new rules on corporate bonuses to discourage bankers who take short term risks.
A new Financial Stability Bureau will ‘implement new rules on pay and bonuses on a global level so that there are no more rewards for failure. We want to impose corporate responsibility on every part of the world.’
The leaders also ordered the IMF to sell billions of dollars of gold reserves to help the world’s poor countries, Brown said.
He said the IMF and World Bank would undergo major reforms to reflect world changes which have seen the rise of China, India, Brazil, South Africa and other new powers.
‘By any measure, the London summit was historic,’ said Obama. Australian Prime Minister Kevin Rudd said the accord ‘begins to crack down on the sort of cowboys in global financial markets that have brought global markets undone.’
-Nampa-AFP