HORSHAM, England, March 14, 2009 -- Finance ministers and central bank governors of the G20, the group of 20 advanced and emerging countries, pledged today to pull the global economy out of recession, but many balked at U.S. requests for more government investment.
The officials promised to give more money to the International Monetary Fund, which is the lender of last resort around the world. They also agreed to greater regulation of the financial system and the credit-rating agencies, which are often blamed for causing the crisis by giving Triple-A ratings to risky securities.
Another issues on which there was agreement was to work to restore lending between and by banks, seen as a key to boosting consumer spending and to getting the global economy back on track.
"This is a global crisis and it requires a coordinated global response," U.S. Treasury Secretary Tim Geithner said in a prepared statement. "We have a strong consensus on the need for both recovery and reform so that we never have to face a crisis like this again."
But that consensus did not extend to the American push for all governments to spend more public money to stimulate their economies.
In a closing communique issued today after the meeting in a palatial hotel here in the rolling hills of West Sussex, the officials did not back Washington's request.
Rather, the communique papered over a deep division on the need for more fiscal stimulus to reverse the worldwide downward economic spiral.
The United States wants the biggest industrialized countries to spend 2 percent of their gross domestic product to boost consumer demand. The Obama administration has called for a global version of its own $780 billion stimulus package.
But the Europeans -- with the exception of Great Britain -- are resisting. France says it has already pumped a lot of public money into its economy and Germany is worried about the impact on inflation, if its government borrows and spends too much.
The American view is that governments must spend more money to create more jobs to boost consumer spending and that the G20 countries should move in the same direction, in a coordinated way, because they are tied together in a global economy.
"All countries really do need to work together and work very aggressively to stimulate their economy," Financial Times economics editor Chris Giles said. "But there's a feeling certainly in America that European countries are not pulling their weight."
China said it could launch an economic stimulus package any time, in spite of the collapse in Western demand for Chinese goods. But China also said it was worried about the safety of its trillion-dollar investment in U.S. treasury bonds.
The meeting in Sussex is to prepare the agenda for the critical summit of G20 leaders scheduled here in the first week of April. In the meantime, American pressure on Europe, is likely to continue.
The G20 nations represent 80 percent of the global economy, they are tied together, and for the first time since the war, the economies of all of them are contracting.
That makes the importance of a coordinated rescue plan very high, though the expectations for that are still quite low.