President Obama this afternoon expressed confidence that the economic and regulatory steps the G-20 countries committed to this afternoon will mark "a turning point in our pursuit of global economic recovery."
"In life, there are no guarantees, and in economics, there are no guarantees," the president said when asked if he was confident that the measures would help the world avoid a depression or deeper recession. "The people who thought they could provide guarantees — many of them worked at AIG, and it didn’t work out so well. So — so there are always risks involved."
That said, the president said he had "no doubt… that the steps that have been taken are critical to preventing us sliding into a depression." Another way of putting it, he said, was that "the steps in the communiqué were necessary. Whether they’re sufficient, …we’ve got to wait and see."
As is standard, language was drafted in the communiqué allowing countries to claim victory in pushing back on issues with which they disagreed.
Stimulus plans, for instance, were kept acceptably vague.
President Obama and his team had pushed for the G-20 countries to commit to stimulus packages that amount to 2 percent of the combined Gross Domestic Products of the G-20 nations; as of now 1.8 percent has been committed. Countries such as France and Germany pushed back, suggesting their stimulus plans were sufficient and they didn’t need to do more.
So the communiqué references stimulus plans countries have already passed, accentuating what has already been done. The G-20 countries are "undertaking an unprecedented and concerted fiscal expansion, which will save or create millions of jobs which would otherwise have been destroyed, and that will, by the end of the next year, amount to $5 trillion, raise output by 4 percent, and accelerate the transition to a green economy. We are committed to deliver the scale of sustained fiscal effort necessary to restore growth."
This is the same basic language adopted by the finance ministers at their G-20 meeting, which the Obama administration has deemed acceptable, if not perfect, and not a firm commitment of the G-20 counties to commit to more.
The president sought to belittle media coverage of these disagreements, saying today "that in the days leading up to the summit, some of the you in the press, some commentators confused honest and open debate with irreconcilable differences."
The communiqué also noted that the G-20 nations further agreed over $1 trillion of additional resources for the world economy through our international financial institutions and trade finance."
These steps include tripling resources available to the International Monetary Fund to $750 billion as well as efforts "to restore credit, growth and jobs in the world economy."
What about the "global regulator" whom France and Germany were pushing?
Said regulator does not appear in this document, per se.
But there is a pledge "to establish a new Financial Stability Board (FSB) with a strengthened mandate, as a successor to the Financial Stability Forum (FSF), including all G20 countries, FSF members, Spain, and the European Commission."
What will the precise powers of the FSB be? That is kept vague. But it’s charter is broad.
The FSB is to "collaborate with the IMF to provide early warning of macroeconomic and financial risks and the actions needed to address them,… reshape our regulatory systems so that our authorities are able to identify and take account of macro-prudential risks,…extend regulation and oversight to all systemically important financial institutions, instruments and markets. This will include, for the first time, systemically important hedge funds; ..endorse and implement the FSF’s tough new principles on pay and compensation and to support sustainable compensation schemes and the corporate social responsibility of all firms;…take action, once recovery is assured, to improve the quality, quantity, and international consistency of capital in the banking system. In future, regulation must prevent excessive leverage and require buffers of resources to be built up in good times."
On the subject of tax havens, the communiqué states that the FSB is committed "to take action against non-cooperative jurisdictions, including tax havens. We stand ready to deploy sanctions to protect our public finances and financial systems. The era of banking secrecy is over. We note that the OECD" — Organisation for Economic Co-operation and Development — "has today published a list of countries assessed by the Global Forum against the international standard for exchange of tax information."
Said President Obama: "By any measure, the London summit was historic. It was historic because of the size and the scope of the challenges that we face and because of the timeliness and magnitude of our response."