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France and Germany square off against US and UK on action needed to reduce financial risk-taking
Gordon Brown last night urged EU leaders to back an audacious plan for a new system of world economic government in which the G20 and IMF would be empowered to tell major economies how they should tailor their national policies to secure sustainable international growth.
Brown outlined his plan to EU leaders at a dinner in Brussels where an agreed strategy, including the governance of executive bonuses, was being hammered out ahead of the G20 summit in Pittsburgh next week.
The Brown proposal, known as the global compact is his latest attempt to urge world leaders, to recognise that international co-ordination of the major economies' fiscal policies is essential to prevent a repetition of the disastrous global slump. He also hopes the plan will help underscore his reputation as a respected world leader on economic issues.
Brown's plan appears to sanction new intrusions by a permanent G20 secretariat into the individual nation states. It is, though, seen by him as a way of addressing the global imbalances, including the surpluses and deficits of different nations, that have lain at the heart of last year's crisis.
Brown said: "We must be ready to commit to even greater levels of co-operation to meet the new challenges ahead. I believe the world's leading economies need not just a new policy, but a new way of making policies, not just a new programme of action, but a new way of managing the global economy."
He accepted his proposal requiring turning the G20 into a permanent body would need unprecedented political commitment from all G20 countries.
The global compact "would include an explicit agreement refreshed each year by the G20 on our common objectives of balanced sustainable and enduring growth, a commitment by each country to play its part, independent analysis and advice from the international institutions and a system of how we can agree to redress any problems that arise," he said. He also claimed there was now evidence that the world stimulus packages had saved 4m jobs in the major economies this year and may save a further 5m jobs next year.
Brown also insisted that the world economic recovery cannot be taken for granted and said the agreed programme of stimulus valued at 5% of world national income must continue next year.
Last night's dinner had been called by Sweden, the current EU president, to try to narrow differences between France and Germany on one side and the Obama administration on the other over bank risk-taking and remuneration.
The issue is seen as central to the international response to the financial crisis, with the exorbitance of the bonuses being paid to bankers believed to have encouraged recklessness and contributed strongly to the banking collapse. (Guardian, 9.18.2009, Ian Traynor in Brussels and Patrick Wintour) http://www.guardian.co.uk/business/2009/sep/17/g20-bankers-bonuses
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