Leaders of 20 largest economies meet in attempt to boost confidence

The leaders released a blizzard of pledges to take action on the global crisis.

McCLATCHY NEWSPAPERS

WASHINGTON — With the uninvited guest in the form of the sharpest global downturn in decades almost on their doorstep, leaders of the world’s 20 largest economies launched frantic efforts Saturday to restore shattered confidence and shore up their economies.

“Over the past months out countries have taken urgent and exceptional measures to support the global economy and stabilize financial markets. These efforts must continue,” the G20 said in their “Washington declaration.”

“At the same time, we must lay the foundation for reform to help to ensure that a global crisis, such as this one, does not happen again,” the statement said.

The leaders agreed to continue their own steps to stimulate the world economy. They also released a blizzard of pledges grouped in two categories: immediate actions to be in place by March 31 and medium-term actions with no specific deadline.

Over the past year, global financial markets, once the crown jewel of the new century’s economy, have frozen. Banks and financial market participants are hoarding cash, unwilling to take on the most basic investment risks. Investors are bringing home capital that had been invested in developing economies. As a result, economic conditions around the world have cratered.

In order to attack the lack of faith in markets, the G-20 leaders agreed on wide-ranging measures to shore up the glaring weaknesses that have been exposed in the regulation of new financial products.

For instance, hedge funds could be regulated for the first time and credit-rating agencies will get tougher oversight.

The meeting took place under gray November Washington skies, underscoring the somber nature of the summit. Instead of finding ways to move the globe forward by eliminating poverty or reducing global warming, the leaders found themselves wrangling over new technical accounting standards for credit default swaps.

Seeking to put the best face on the meeting, President George W. Bush emerged from the closed-door talks and declared the summit a success.

“It was a very productive summit meeting,” Bush said.

“Our credit markets are beginning to thaw,” he said, but it is going to take more time for measures that have been enacted to take hold.

Bush defended the decision to have more than one summit.

One meeting “wasn’t going to solve the world’s problems,” Bush said.

Bush, who will leave office Jan. 20, won’t have much say about the direction that the G-20 takes.

But White House officials made clear that Bush does not want his legacy to include the end of the open-market economic policy that Washington has championed for two decades.

“The main reason the president wanted to host this meeting ... [is] to make sure in this time of anxiety and uncertainty we don’t want to have a rollback on those principles of free trade and open investment,” said David McCormick, the U.S. Treasury undersecretary for international affairs.

Europeans won pledges to increase regulation of hedge funds. British Prime Minister Gordon Brown won a strong pledge from the leaders for more stimulus measures to boost national economies.

But the leaders were chastened by the fact that the crisis was not over and financial markets remain hobbled.