Obama, G-20 Leaders Agree on 'Historic' Steps to Jump-Start Global Economy

Brown dubs the stimulus as the largest the "world has ever seen."

April 2, 2009, 7:44 AM

LONDON April 2, 2009 -- President Obama played a central role in his first international summit -- reaching agreement with world leaders on several bold steps to jump-start the global economy.

With the ink barely dry, Obama expressed optimism that the regulatory steps G-20 leaders committed to take this afternoon would be considered a "turning point" in the pursuit of a global economic recovery.

"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," Obama said.

But when asked during his post-G-20 press conference whether he could say with confidence that the steps taken by the industrialized nations today would prevent a further global economic slide, Obama took a wait-and-see approach.

"In life, there are no guarantees, and in economics, there are no guarantees," the president said. " I have no doubt, though, that the steps that have been taken are critical to preventing us sliding into a depression. ... I think the steps in the communique were necessary. Whether they're sufficient, we've got to wait and see."

He said the steps agreed upon by the world leaders, who together control 85 percent of the world's wealth, were critical but "not a panacea."

British Prime Minister Gordon Brown, who hosted the G-20 economic summit in London, summed up their approach, saying, "Global problems require global solutions."

Whether this summit enacted what will be solutions to the global recession won't be known for months.

Read ABC News' George Stephanopoulos' analysis of President Obama's G-20 news conference.

Obama's remarks came as the leaders of the world's wealthy nations agreed today to inject $1 trillion into the global economy in an effort to pull it out of the spreading recession.

Brown called the investment the "largest macroeconomic stimulus the world has ever seen."

"We are undertaking an unprecedented and concerted fiscal expansion," a communique from the G-20 group said.

Obama said that world leaders have "learned the lessons of history" and warned against retreating behind borders.

"History tells us that turning inward can help turn a downturn into a depression," he said. "And this cooperation between the world's leading economies signals our support for open markets, as does our multilateral commitment to trade finance that will grow our exports and create new jobs."

Brown, who's been the president's wingman throughout the summit, suggested that the days of U.S. primacy are long gone, pointing to Thursday's summit as an archetype for future global negotiations.

"The old Washington consensus is over. Today, we have reached a new consensus that we take global action together to deal with the problems we face," he said.

While Obama upheld America's role as a leader on the world stage, he noted that there are now more players at the negotiating table and nations like Japan, China and India now play critical roles in the global economy.

"If it's just Roosevelt and Churchill sitting in a room with a brandy, you know, that's an easier negotiation. But that's not the world we live in. And it shouldn't be the world that we live in," he said.

The communique predicted the stimulus plan "will save or create millions of jobs which would otherwise have been destroyed, and that will, by the end of next year, amount to $5 trillion, raise output by 4 percent, and accelerate the transition to a green economy."

Leaders Pledge $1 Trillion in World Stimulus

The $1 trillion will be injected into the economy through the International Monetary Fund and other lending institutions.

The G-20 leaders agreed on more regulation for banks, new rules for executive bonus pay, interest rate cuts, corporate responsibility, and sanctions against tax havens that don't comply with G-20 rules.

"Today's decision will not immediately solve the crisis, but we've begun the process by which it will be solved," Brown said in the closing news conference of the G-20 sessions. "This is collective action, people working together at their best. ... I think a new world order is emerging. We will together manage the process of globalization."

Brown announced the formation of a new Financial Stability Board (FSB), with the International Monetary Fund monitoring progress of G-20's objectives, surveying the global economy and providing early warnings. But there wasn't a clear explanation of exactly what kind of powers the FSB would have.

The Obama administration contends that the FSB is not a "global regulator" but rather a "mechanism for international coordination."

Wall Street rallied more than 200 points and went over 8,000, partly in response to the G-20's announcement.

The communique was vague on details and fashioned so that all sides could claim victory, but the meeting was seen as a true test of President Obama's international role. Obama pressed for European countries to invest more heavily in a stimulus program with direct infusions of capital while others, particularly French President Nicolas Sarkozy and German Chancellor Angela Merkel, demanded tougher regulation of international firms.

Today, Obama also played the role of the peacemaker, stepping into an argument between Sarkozy and Chinese President Hu Jintao over tax havens.

Obama also showed his human side during his press conference Thursday, sneezing twice from a cold he said he's been fighting all week. Otherwise, the president answered questions from U.S. reporters and plucked out four members of the international press from the boisterous crowd of 2,500.

"I'm going to call one foreigner -- actually, I'm the foreigner," he said, smiling.

"That's why I smiled," the president said awkwardly, clarifying that he'd call upon "one correspondent not from America."

Global Stimulus a Victory?

Some economists expressed skepticism about what these new measures would achieve.

"The immediate task at hand was how to immediately prevent this recession from getting worse and it's not clear they've done that," said Linda Yueh, a fellow in economics at the University of Oxford. "Obama pushed for everyone to spend 2 percent [of GDP] and what he got was counting for what countries have already agreed to spend. So this is not new money, this is money that countries have already spent before they came to the summit."

Stimulus plans were kept vague in the communique.

"Never we thought we would obtain such a large agreement," said Sarkozy, who had threatened to walk out of the summit if the group did not agree to stricter fiscal regulations.

"It is not the victory of one camp on another," said the French president, who called the meeting tense. "There is awareness from everyone that the world must change.The Anglo-Saxon countries are convinced there must be reasonable rules."

"There were tensions up until 30 minutes ago," he said at a news conference shortly after the agreement was reached. "A page was turned today."

Obama suggested that some of the tension was merely a product of the media.

"I know 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," he said. "But after weeks of preparation and two days of careful negotiation, we have agreed on a series of unprecedented steps to restore growth and prevent a crisis like this from happening again."

White House officials said that behind the scenes there is much more agreement than differences, despite the fiery rhetoric from some world leaders in the days leading up to the summit.

The most contentious and high-profile standoff pits some key European nations against Obama and Brown.

Leading the charge against further government stimulus were the leaders of France and Germany, who pushed for an even stronger worldwide regulation of banks and hedge funds, something Sarkozy called "non-negotiable."

Having already passed stimulus packages with extensive social spending programs, many European countries do not want to take on even more debt.

Obama to Brazilian Leader: 'Love This Guy'

President Luiz Inacio Lula de Silva of Brazil said the summit would be a "spicy" affair and blamed the financial crisis on the "irrational behavior of people who are white and blue-eyed."

Today Obama greeted the Brazilian leader with effusive praise.

"That's my man, right here, love this guy. He's the most popular politician on Earth. It's because of his good looks," Obama said.

Administration sources said that one of the interesting dynamics playing out here is the rhetoric of these G-20 leaders versus the reality of what they and their representatives are saying behind the scenes.

"I was in Brazil last week," Brown said Wednesday, "and I think President Lula will forgive me for saying this -- he said to me, 'When I was leader of the trade unions, I blamed the government. When I became leader of the opposition, I blamed the government. When I became the government, I blamed Europe and America.' And he recognizes, as we do, that this is a global problem."

Obama alluded to this as well when asked about the heated words coming from the leaders of France and Germany against his push for more global stimulus.

"There have been differences in terms of how should that stimulus be shaped. There have been arguments, for example, among some European countries that because they have more of a social safety net, that some of the countercyclical measures that we took -- for example, unemployment insurance -- were less necessary for them to take," the president said.

"But the truth is ... that's just arguing at the margins. The core notion that government has to take some steps to deal with a contracting global marketplace and that we should be promoting growth, that's not in dispute," he said.

ABC News' Christophe Schpoliansky contributed to this report

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