G-20 countries support measures to bolster world economy

The Group of 20 rich and developing countries have pledged to carry on with measures to boost the global economy, despite signs of a fledging recovery.

At the end of a meeting here Saturday, G-20 finance officials also promised a crackdown on bankers' pay and committed to giving developing countries a greater say in international financial regulation.

A joint communique says that fiscal and monetary policies will stay "expansionary" for as long as needed to reduce the chances of a double-dip recession after the worst financial crisis since World War II.

There is also an agreement to impose tighter control on bankers' pay. But officials have been forced to compromise after Britain and the U.S. deemed French and German calls for a cap on bonuses unworkable.

Addressing finance officials at the start of their talks here, British Prime Minister Gordon Brown warned against "complacency or overconfidence" in the face of mounting signs of at least a modest economic upturn.

Japan, Germany, France and Australia all recording growth in the second quarter. Britain is widely expected to do so in the third quarter.

"We meet at a critical juncture for co-operation in the global economy," Brown told officials from countries representing 80% of the world's output. "The G-20 needs to agree 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."

Taking the unusual step of pulling rank on his Treasury chief Alistair Darling, the host of the London meeting, Brown also stressed the need for reform of the banking system to restrict bonus payments and called for sanctions against tax havens to be put in place early next year.

The timing of a so-called exit strategy from the recent massive economic stimulus to drag the world economy out of recession is not yet agreed upon.

Germany has pushed for G-20 nations to start talking about when and how they will withdraw stimulus measures, but others have warned that withdrawing the massive amounts of money injected into the ailing world economy any time soon could risk a double-dip recession.

"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," said Brown. "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."

There has also been a difference in emphasis for the London meeting, which began with a working dinner on Friday, as European countries push for a crackdown on bankers' bonuses, while the U.S. has stressed the need to boost bank reserves to prevent a repeat of the financial crisis.

Developing countries, meanwhile, used the gathering Friday to press for reform of global financial governance, proposing shifts in voting power at the International Monetary Fund and the World Bank in favor of developing countries.

Brown expressed broad support for all those measures, saying they were necessary to underpin recovery of the world economy.

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 refuse to share taxation information with others and help tax evasion. The sanctions they want would include cutting investment, imposing taxes on funds held in tax havens and withdrawing development aid, Brown said in July.

Several countries — including Switzerland and Liechtenstein — have moved swiftly to increase how much tax information they swap 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.

U.S. Treasury Secretary Timothy Geithner is using the meeting to push talks on a new international accord to increase banks' capital reserves.

The Obama administration's proposal would establish stronger international standards for the reserves banks are required to hold to cover potential loan losses. The U.S. wants to reach agreement on an accord by the end of 2010, with countries agreeing to implement the plan by the end of 2012.

Brazil, Russia, India and China — the so-called BRIC grouping — held their own mini-summit on Friday, calling for faster action on changes to give them a greater say in governance of financial markets.

The G-20 countries have agreed to review the leadership of institutions like the World Bank and IMF, which has received pledges of more money to help struggling countries. The IMF is customarily headed by a European and the World Bank by an American.

The BRIC quartet want a shift in voting power at both the IMF and World Bank in favor of developing countries.

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.