The heads of government and international organisations of the Group of 20 agreed in London on wide-ranging measures to prop up the world's troubled economy with a price tag of US$1.1 trillion at a summit that British Prime Minister Gordon Brown said produced 'a global plan for recovery on unprecedented scale'.
Markets in the United States and Asia loved it. Leaders fell over themselves to congratulate each other. But the over-exuberant language of the 11-page final communique papers over a lot of cracks of disagreements and potential failure. Success will demand more meetings beyond the next one in September in New York.
In particular, there is no certainty that the US$1.1 trillion headline figure will be spent or well-spent; there was disagreement over the shape and form and powers of any international regulator; there were warm but fuzzy words about the importance of free trade, which will be tested in the fires of potentially protective national parliaments; the International Monetary Fund did best with a tripling of its resources, but most of the money will be allocated according to the current shareholdings reflecting the old balance of power; and Hong Kong and Macau had their own troubling place in the spotlight as 'tax havens'.
Most of the promises at the G20 meeting will be subject to national political decisions, which will hold sway over further reform of the global financial architecture.
The most obvious omission was that of US demands, backed by Japan and Britain, for a fresh global stimulus of US$2 trillion - which is probably why French President Nicolas Sarkozy and German Chancellor Angela Merkel, both opposed to further stimulus, called the summit 'historic'. US President Barack Obama was less effusive. He described the measures adopted as both 'critical' and 'necessary', but added: 'Whether they're sufficient, we've got to wait and see.'
The communique claimed that member countries had embarked on 'an unprecedented and concerted fiscal expansion, which will save or create millions of jobs which would otherwise have been destroyed, and that will amount by the end of next year to US$5 trillion, raise output by 4 per cent, and accelerate the transition to a green economy'. That sentence is typical of a worrying aspect of the communique, offering no sign of the arithmetic, let alone the economics, supporting the claims.
The biggest winner was the IMF, which had been licking its wounds since the 1997 financial crisis, when its insistence on austerity sent Asian economies into a tailspin. In London, it was promised that its lending resources would be tripled to US$750 billion.
