The leaders admitted that the main causes for the world markets shake had been regulatory rules great oversights. They have also promised stricter limitations for hedge funds used by investors for protecting themselves from business risk, and companies establishing credit ratings, as well as for other financial institutions in order to prevent such crisis from remerging. With tax heaven countries has been made a settlement, action will be taken in prevention of the trade protectionism, and 1,100 billion dollars aid will be allotted for the countries most endangered by the financial crisis.
According to the French President Nicolas Sarkozy, financial sector more serious rules will be represented through the turning of the new leaf and the end of the Anglo-Saxon free market model. On the other side of the Atlantic, experts have also confirmed this claim.
"One epoch is behind us. The United States are becoming less dominant while other countries` influence is growing," said for the Bloomberg agency Robert Hormats, Vice Chairman of Goldman Sachs International, who used to prepare former American presidents - Gerald Ford, Jimmy Carter and Ronald Reagan - for summits.
Without a peer, the American President has proved at the last summit that, upon electing him, the USA were set for a new course different from the one of his predecessor George Bush who had insisted on the United States` superiority. Barack Obama has accepted Angela Merkel`s and Nicolas Sarkozy`s demands to not insist on the unique action of all countries in financial stimulus matters.
In spite of the German Chancellor`s "fear from wastefulness" in pumping the money in languishing economies, owing to such a stance the leader of the fourth in the world economy has found herself at the margins of the big world decisions such as the ones made in Bretton Woods.
However, Barack Obama and the summit host, the British Prime Minister Gordon Brown have managed to hustle through the proposal for tripling the IMF resources - from 250 to 750 billion dollars - whereby Japan, European Union and China will provide the first 250 billion. That money will satisfy the needs of the East European countries and will remain as a backup fund for other countries.
The additional 250 billion dollars will be available for the trade stimulus through the lending activities agencies, such as the World Bank, while the rest of the sum will be given to the IMF and special drawing rights.
Beside all this, significant step has been made regarding the IMF managing where China, India and Brazil will be more competent. Also, as an important decision it has been announced the forming of the financial stability committee that should gather regulators and help the IMF to announce possible danger in time.
According to the Nobel Prize Winner Joseph Stiglitz, mutual summit statement is a kind of disavowal from the previous American insisting on capitalism without limitations.
"This is the historic moment when the world has gathered and said `we have been wrong in insisting on deregulation`," said Stiglitz.
However, Miroslav Kalousek, Minister of Finance of the Czech Republic, holding the European Union Presidency, believes important is the fact that "the statesmen have clearly agreed that the free market and market economy principles are the only way out of the crisis." He says that the most important decision in London was the one dealing with reasonable inflow of the state money, the fact European Union feared from the most, before all Germany and France.
The Czech EU Presidency warns to the need for the banks to be cleaned from toxic assets, such as unpayable credits.
"We have the crisis of trust that can be renewed in two steps. The first - to really clean the banking sector from the toxic assets since otherwise banks could hardly trust one another. The second step consists of more efficient regulation and financial sector surveillance," said Kalousek.
While the 20 most developed countries leaders have not managed to achieve agreement on the banking system reform, certain shift has been made in world financial institutions management. However, there is still more to be done within the IMF system, which confirms this institution`s report recently published in British media.
Analyzing great credit debt of the Central and Eastern European countries, the IMF has suggested the European Union to allow these countries to join the Eurozone regardless all the procedures and therefore make it possible for them to use euro instead of their national currencies. Although the IMF considers this step as a contribution to foreign debt solving of the countries in crisis, exactly this and inobservance of all the European Central Bank rules could compromise the euro survival.
Even without this hazardous move, the Eurozone has problems with some current member states, such as Spain, Portugal, and Greece, not being able to respect strict rules relating to budget deficit and inflation level. As expected, the EU has promptly rejected this suggestion saying the IMF document was, in fact, the "out-of-date internal document."
Such a gaffe points to more discussion on the world financial institutions functioning at the next G20 summit. Although the results of the measures adopted at the last London meeting will be visible only in a year`s time, the summit was of great importance, before all thanks to its host, Gordon Brown.
According to some estimation, Brown`s reputation among the world leaders may have never been greater. This especially having in mind his enormous engagement and talks with the German Chancellor Angela Merkel in making the decision on great financial aid package possible, as well as making Barack Obama accept that countries, such as Germany, should not be obliged to participate in financing that package. In spite of not being so popular within the United Kingdom, the island media have paid tribute to his engagement dubbing him "the world finances minister" and the G20 agreement "Brown`s new world order."
* CEV Magazine is an online publication of the Centre for European Values. (Photo: European Communities, 2009)
