Washington Anti-Crisis Summit Failed to Rescue World Economy

Business Materials 18 November 2008 10:45 (UTC +04:00)
Washington Anti-Crisis   Summit Failed to Rescue World Economy

Azerbaijan, Baku, November 17/ Trend , corr A. Badalova/ The summit in Washington marked the most significant event of last week targeted at addressing global financial summit. Long-awaited meeting of G20 once again displayed commitment of countries to joint action on problems caused by a global crisis. The major result of this meeting was recognizing importance and preparedness to cooperate to find a way out of the situation and updating financial systems to prevent crisis from deepening. However, the key problem - the way of the problem - remained unsolved. The world leaders could not agree upon any concrete measures.

Such results were not unexpected and disappointing. Though some looked forward for this meeting, it did not promise anything from the very start. The experts were absolutely skeptical of possible efficient measures regarding financial crisis.

As if foreseeing the results of the summit, Pascal Salin, Professor of economics, University Paris-Dauphine, and former president of the Mont Pelerin Society said to Trend earlier that he believes that referring to "effective and complex measures" means that the states do not really know what to do and which are the most important causes of the crisis, which seems to be the case. The reason is that politicians want to give the feeling to opinion that they are able to cure the problems and, in order to justify their meeting, they have to take decisions. These measures do not address the only important thing which would consist in avoiding the volatility of monetary policy and interest rates

According to Dean Baker, Co-Director of the Centre for Economic and Policy Research in Washington, it is not worth to expect concrete results until US will that admit that sometimes there is a need to reckon with international organizations. "A unified decision requires the countries affected by the crisis to hand over part of their authorities to international financial organizations," Baker said to Trend . Here is zero willingness in the United States to accept this possibility at this point, which means that any commitments to change will be largely cosmetic, he said.

In spite of a lack of concrete measures, a great number of proposals were made at the summit including the need to ensure transparency of world financial system, exercising strong control over financial organizations and even refusal from protectionism policy.

The summit ended with six item declaration. G20 decided to continue 'self-sacrificing' attempts and take any measures to stabilize financial system. The second item calls for supporting monetary policy in accordance with national economic conditions of every country. Financial mechanism will be used to encourage demand in domestic markets. The next item is to support lagging and developing economies to secure access to financing. World Bank and other bank organizations will work hard and help developing countries. G20 will help IMF, WB and other organizations to ensure their fulfillment of tasks.

According to the last item of declaration, new measures will be worked out to regulate the market of derivatives and other securities. Their transparency is expected to increase.

Julian Jessop, Chief International Economist at British Capital Economics, commenting on the results of the summit said to Trend via e-mail that the real purpose of this summit was to agree a work programme for reform of the global financial system. In that respect we would suggest that it has been a success.

"This weekend's G20 summit failed to deliver any new stimulus measures to rescue the world economy from the current recession. But at least it avoided the knee-jerk responses that would have made things worse," Jessop said.

The lack of specific commitments on additional policy stimulus will disappoint some. The statement simply said that leaders "recognise the importance of monetary policy support, as deemed appropriate to domestic conditions" and "will use fiscal measures to stimulate domestic demand, Jessop added. "More importantly, world leaders took the first steps on the reforms of the global financial system necessary to make it less likely that this crisis will happen again," he said.

Heads of state and heads of international financial organizations were quite satisfied with the results of the summit. President of France Nicolas Sarkozy described the declaration as "historic agreement". President George Bush, UK Prime Minister Gordon Brown and Russian President Dmitry Medvedev also welcomed results of the summit.

President of the World Bank Robert Zellick said G20 Washington summit laid a productive foundation to move forward in the way out of the global crisis. "The important at the moment is to take concrete measures," he said. G20 decided to take concrete steps after next summit which is expected to be held on April 30, 2009 in London.

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