Friday, April 03, 2009

G20: Gordon Brown brokers massive financial aid deal for global economy.

Gordon Brown has called it "a coming together of the world", and Barack Obama has said it is "an historic turning point in the pursuit of world economic recovery".

The sprawling deal set out in a nine-page communique hammered out over two days of talks in London also contains tougher-than-expected measures to tighten financial regulation, including a clampdown on tax havens, the final part of the deal to be struck, after an impassioned call for compromise by Barack Obama.

The US president said that "the patient had stabilised and was in good care", claiming that, by any measure, the London summit was historic.

"It was historic because of the size and the scope of the challenge that we face and because of the timeliness and the magnitude of our response," he said.

And even the markets seemed to react as if something significant had taken place.

The transatlantic compromise between America and Europe led to a jump in shares in London and New York. The FTSE index closed up more than 4% at 4,124.97. The deal won praise from business leaders, as well as anti-poverty campaigners, but dismayed the green lobby with its lack of measures to combat climate change.

Not that you would know any of this were you to listen to any of the Tory spokesmen made available last night. The fact that the G20 have all got together and come to an historic agreement was lost on the Tory spokesman I listened to on the radio, who seemed determined to find fault, despite the fact that this leaves them out of the loop from an agreement made between twenty nations.

The Tories, uniquely, believe that the government should do nothing and that the recession should be allowed to run it's course. When one witnessed yesterday the coming together of twenty nations, each with their own specific agendas, around a common set of ideals, one realised more than ever just how out of touch with everyone else David Cameron's Conservative Party are.

The fact that they are leading Labour in the polls is astonishing, and shows how people are paying scant attention to what it is that the Tories are actually proposing.

The deal made rewrites the rules of capitalism:

• A global common approach to dealing with toxic assets that impair the ability of banks to lend.

• A $1.1tn package to supplement the $5tn stimulus to the global economy by individual countries. The $1.1tn will allow the IMF, the World Bank and others to increase lending to vulnerable countries. There will be a tenfold increase to $250bn in the IMF's facility allowing members to borrow from other countries' foreign currency reserves.

• More power for leading developing countries within the IMF and World Bank, to end the stranglehold of the US and Europe on their top jobs.

• $200bn of trade finance over two years to help reverse the steepest decline in world trade since 1945, with cash from a range of public and private sources.

• A pledge that the fiscal stimulus, including the sale of gold by the IMF due to raise $6bn, will give help to the poorest nations and create green jobs.

And, at Obama's insistence, a crackdown on country's which act as safe havens for tax avoidance and an agreement to name and shame them and, if necessary, to take sanctions against them.

Nicolas Sarkozy said the summit meant that the era of secrecy by banks was over; "great progress" had been made, he said, and the page had been turned on the economic model which had dominated since Bretton Woods in 1944 created the world's institutional framework.

"Since Bretton Woods, the world has been living on a financial model, the Anglo-Saxon model. It's not my place to criticise it, it has its advantages [but] clearly today a page has been turned," he said.

The German chancellor, Angela Merkel, said the deal was "a very, very good, almost historic compromise".
And what was David Cameron's reaction to this historic compromise?
David Cameron, insisted it was now time for the prime minister to switch back to the issue of the domestic recession and to consider Britain's "truly horrific" deficit.
It would appear that the Tories, with their eye on power, simply don't get it. Their reaction to this financial crisis has been one which no country anywhere on Earth is talking about emulating.

Perhaps Cameron doesn't get the severity of the problem, but I think he does and that he is simply determined to use this as an opportunity to put some distance between his policies and those of Labour.

But his plan, to let the recession simply run it's course, would cause misery to tens of thousands of British families, which makes the fact that he is leading in the polls simply extraordinary.

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