Barroso outlines five tests of G20 London summit

(Xinhua)
Updated: 2009-04-01 10:50

European Commission President Jose Manuel Barroso holds a news conference at the EC headquarters in Brussels March 31, 2009 ahead of the G20 group of rich and developing nations meeting on April 2 in London. [Agencies]

LONDON -- The upcoming G20 summit in London should pass five tests for its success, including a consensus on fiscal stimulus and global financial reform, European Commission President Jose Manuel Barroso said on Tuesday.

"I believe this summit will be judged on five main aspects," Barroso told a pre-summit press conference in Brussels, which reached here.

Setting out the European Union (EU)'s joint position at the London summit, which will take place on Thursday, Barroso said the first test should be the world-wide coordination of fiscal stimulus.

"The key to recovery is boosting global demand. Demand means jobs. And jobs are our first priority," he said.

But Barroso again rejected a call by the United States for EU countries to boost their fiscal stimulus efforts, highlighting a transatlantic rift over the issue.

"In Europe our fiscal effort is over 400 billion euros (US$532 billion). It will rise to nearer 500 billion euros (US$665 billion)," he said. "The priority is now to implement the discretionary part of it quickly, and in full. We must focus on implementation, focus on coordination."

British Foreign Secretary David Miliband said on Sunday that Britain and the US will not push G20 leaders to announce specific spending pledges.

To create lasting demand, a confidence stimulus is also needed, which requires a very ambitious reform of financial markets.

"But equally important, it requires trust in the financial system. That is why more regulation, effective sensible regulation, is essential," Barroso said.

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The EU, led by Germany and France, has stressed that financial reform should be the top priority at the London G20 summit, saying it would not only help prevent recurrence of the current financial crisis, but also help rebuild confidence.

The EU itself is putting into place tougher regulations on credit rating agencies, capital requirements and deposit guarantees. The commission will very soon take action on hedge funds, private equity and remuneration.

"The challenge for the G20 is swift, coherent and global implementation of financial market reform," Barroso said, adding he was pleased with the US announcement to come with proposals on capital requirements and hedge funds.

As a sign of policy shift, US Treasury Secretary Timothy Geithner said Thursday that US President Barack Obama will push higher global financial regulatory standards at the London summit.

Geithner also announced sweeping US regulatory reform proposals on the same day.

"The G20 should make specific commitments on capital requirements, hedge funds, credit ratings agencies, accounting standards and on remuneration," Barroso said. "We also want action on tackling tax havens and uncooperative jurisdictions."

Thirdly, Barroso said the world needs a global governance stimulus, which means the international financial institutions, in particular the International Monetary Fund (IMF), should be reformed to reflect the global reality.

"International financial institutions must be more effective, more representative and better resourced," he said, calling for a massive boost of IMF lending resources to help economies in difficulty.

The EU wants to see IMF resources at least be doubled from current US$250 billion to US$500 billion.

EU countries have already agreed to provide 75 billion euros (US$100 billion US dollars) in loan to the IMF, together with a pledge by the Japan to make another contribution of US$100 billion.

Barroso said he hoped others could follow the EU's suit by paying the remaining US$50 billion.

As to reform of the IMF, Barroso signaled his support for more saying of emerging economies.

"Emerging economies must have an equitable stake (in the IMF). EU member states will have to be flexible on how this is achieved, " he said.

Barroso said there can be no recovery without free and fair trade.

"The G20 must again say three important words loud and clear: no to protectionism," he said. "We must move ahead with the Doha talks, which could boost the global economy by at least US$150 billion per year."

As the last test, the London summit must come out with a development and climate change stimulus.

"There can be no recovery without fairness vis-a-vis the developing countries and coherence with our fight against climate change," Barroso said.

The EU's top official said developing countries must not pay the price of a crisis created in the developed world, so the London summit must pledge to meet the aid promises to poor countries.

Barroso said the financial crisis offers an opportunity for investment in smart green growth.

"The world should also target its investment on the low carbon sectors of the future," he said.

"When we speak about stimulus I believe it is important to have this idea -- it is a stimulus in terms of demand, a stimulus of confidence, a stimulus of global governance, a stimulus to trade and a stimulus to development aid," Barroso said.

But he warned the London summit will yield no "miracle solution " for the financial crisis and more talks may be necessary later this year.

"The G20 will not end this crisis overnight. But it can, it must, it will, make a difference," he said.

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