2008 G-20 Washington summit
Monday, November 17th, 20082008 G-20 summit
Information
Location
Washington, D.C.
Participants
G-20
Also known as
Bretton Woods II
Key points
• common understanding of the root causes of the global crisis discussed
• Past actions taken by countries and future actions to be made to address the immediate crisis and strengthen growth
• agreement on common principles for reforming financial markets
• launch of action plan to implement those principles and to develop further specific recommendations for later review
• reaffirmation of commitment to free market principles
The G-20 Leaders Summit on Financial Markets and the World Economy took place on November 14–15, 2008 in Washington, D.C. It achieved general agreement amongst the G-20 on how to cooperate in key areas so as to strengthen economic growth, deal with the financial crisis, and lay the foundation for reform to avoid similar crises in the future.
Contents
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Preliminary history
Approaches in the early 2000s
Bretton Woods II was an informal designation for the system of currency relations which developed during the 2000s. As described by political economist Daniel Drezner, “Under this system, the U.S. is running massive current account deficits to be the source of export-led growth for other countries. To fund this deficit, central banks, particularly those on the Pacific Rim, are buying up dollars and dollar-denominated assets.”
The notion of a “revived Bretton Woods system” was introduced in a 2003 paper by Dooley, Folkerts-Landau, and Garber, in which it is described as arising after the end of the Cold War, out of the choice of countries,
mainly in Asia,
In 2005, Roubini and Setser argued that the system is unsustainable:
If the US does not take policy steps to reduce its need for external financing before it exhausts the world’s central banks willingness to keep adding to their dollar reserves – and if the rest of the world does not take steps to reduce its dependence on an unsustainable expansion in US domestic demand to support its own growth – the risk of a hard landing for the US and global economy will grow. The basic outlines of a hard landing are easy to envision: a sharp fall in the value of the US dollar, a rapid increase in US long-term interest rates and a sharp fall in the price of a range of risk assets including equities and housing. The asset price adjustment would lead to a severe slowdown in the US, and the fall in US imports associated with the US slowdown and the dollar’s fall would lead to a global severe economic slowdown, if not an outright recession.
Financial crisis of 2007–2008
On September 26, 2008, French, and current European Union president, Nicolas Sarkozy, said, “we must rethink the financial system from scratch, as at Bretton Woods.”
On October 13, 2008, British Prime Minister Gordon Brown said world leaders must meet to agree to a new economic system. “We must have a new Bretton Woods, building a new international financial architecture for the years ahead.”
Italian Economics Minister Giulio Tremonti has said that Italy will use its 2009 G7 chairmanship to push for a “New Bretton Woods.” He has been critical of the U.S.’s response to the global financial crisis of 2008, and has suggested that the dollar may be superseded as the base currency of the Bretton Woods system.
The Summit
G20 leaders and delegates attend the Summit on Financial Markets and the World Economy Saturday at the National Building Museum in Washington, D.C. on November 15, 2008.
Participating entities
The formula is “G-7 plus”. In announcing the summit, US President George Bush said that the summit would bring together members of the G20 industrial nations. The G-20 was set up to respond to the financial turmoil of 1997-99 through the development of policies that “promote international financial stability”. The G-20 comprises countries considered to be systemically important, but omits over 170 governments (192 governments are members of the United Nations).
The first meeting of the G-20 leaders on financial markets and the world economy was held in Washington, D.C. on November 14-15, 2008. The participants were: Argentina, Australia, Brazil, Canada, China, France, Germany, India, Indonesia, Italy, Japan, Mexico, Republic of Korea, Russia, Saudi Arabia, South Africa, Turkey, the United Kingdom, the United States of America, the European Union (represented by France’s President Nicolas Sarkozy as President of the European Council, as well as by José Manuel Barroso, president of the European Commission), the Netherlands (allowed extraordinary presence), Spain (allowed extraordinary presence), the World Bank, the International Monetary Fund and the Financial Stability Forum. Although Dutch Prime Minister Jan Peter Balkenende arrived at Andrews Air Force Base on the evening of November 14, he immediatley returned to the Netherlands when notified of the death of his father.
Suggestions
German Chancellor Angela Merkel and French President Nicolas Sarkozy said “Bretton Woods II” should bring about “genuine, all-encompassing reform of the international financial system”
Key achievements
The White House reported that the summit had achieved five key objectives. The leaders had:
- reached a common understanding of the root causes of the global crisis;
- reviewed actions countries had taken and would take in the future to address the immediate crisis and strengthen growth;
- agreed on common principles for reforming their financial markets;
- launched an action plan to implement those principles and asked ministers to develop further specific recommendations that would be reviewed by leaders at a subsequent summit; and
- reaffirmed their commitment to free market principles.
A summary of the meeting’s other salient points is presented by the White House in the “Fact Sheet”
Despite the optimism expressed by many of those present, doubts soon began to emerge about the success of the meeting and the chances of achieving all its objectives.
Reactions
- – Brazil’s president Luiz Inacio Lula da Silva welcomed the summit’s decision to give a role to the emerging economic powers like Brazil, China and India in restructuring the global economy.
- – China’s president Hu Jintao listed four priorities in reforming the international financial system: stepping up international cooperation in financial regulation; advancing reform of international financial institutions; encouraging regional financial cooperation; and improving the international currency system.
- – After the meeting, President Sarkozy of France said: “For the first time, countries as different as those at this G20 in the United States have reached agreement on the principles, the procedures for action and on an ambitious action plan.”
- – German Chancellor Angela Merkel said that the stalled Doha round of global trade talks should be pushed forward so that a basic agreement could be reached before President Bush leaves office in January.
- – India’s prime minister Manmohan Singh welcomed the summit “for the first time there was a genuine dialogue between many of the developed countries and the emerging economies”
- – UK Prime Minister Gordon Brown spoke at a press conference: “These are extraordinary times and they require extraordinary measures.”
- – President of the United States of America George W. Bush said “We are adapting our financial systems to the realities of the 21st century”
- – EU Commission President Jose Manuel Barroso was pleased with the outcome of the summit: ‘I can really say that this was a historic summit. I am very, very happy.’ He added that no one had expected a miracle solution, emphasizing that there was now a ‘clear time schedule’ for reforming the world financial system. ‘This is the beginning of a process, not the end,’ he explained.
Similar efforts
There is a UN “Interactive Panel on the Global Financial Crisis”‘, set up by the UN General Assembly. It held its first meeting in New York on 30 October 2008, led by Professor Joseph Stiglitz. It is covering similar ground as the body described above, but involving a broader range of countries. It lobbies for an agreement involving the “G-192″ i.e. all the members of the UN, not just the G-20.
See also
- Global financial crisis of 2008
- Foreign exchange reserves
- Exchange rate regime
References
- ^ a b “European call for ‘Bretton Woods II’”, Eurodad (2008-10-16). Retrieved on 16 November 2008.
- ^ “Summit on Financial Markets and the World Economy”. White House (2008-11-11). Retrieved on 2008-11-16.
- ^ Lex Rieffel (2008-10-27). “The G-20 Summit: What’s It All About?”. Brookings Institute.
- ^ Daniel Drezner (February 24, 2005). “How Stable Is Bretton Woods 2?”.
- ^ Michael P. Dooley, David Folkerts-Landau, Peter Garber (September 2003). “An Essay on the Revived Bretton Woods System”. National Bureau of Economic Research.
- ^ Nouriel Roubini, Brad Setser (February 2005). “Will the Bretton Woods 2 Regime Unravel Soon? The Risk of a Hard Landing in 2005-2006″.
- ^ George Parker, Tony Barber and Daniel Dombey (October 9, 2008). “Senior figures call for new Bretton Woods ahead of Bank/Fund meetings”.
- ^ Agence France-Presse (AFP) (October 13, 2008). “World needs new Bretton Woods, says Brown”.
- ^
- ^ James Kirkup, Bruno Waterfield (2008-10-17). “Gordon Brown’s Bretton Woods summit call risks spat with Nicholas Sarkozy”, The Daily Telegraph. Retrieved on 16 November 2008.
- ^ “Italy queries dollar’s role in Bretton Woods reform”, Reuters (2008-10-16). Retrieved on 16 November 2008.
- ^ Parmy Olson and Miriam Marcus (2008-10-16). “Bringing The Banking Mess To Broadway”, Forbes. Retrieved on 16 November 2008.
- ^ Guy Dinmore (2008-10-8). “Giulio Tremonti: A critic demands a new Bretton Woods”, Financial Times. Retrieved on 16 November 2008.
- ^ “Delegations to the Summit on Financial Markets and the World Economy”, White House (2008-11-14). Retrieved on 16 November 2008.
- ^ “Breton Woods II conference FAQs”, Eurodad (2008-10-23). Retrieved on 16 November 2008.
- ^ {cite news|url=http://timesofindia.indiatimes.com/India/Drop_protectionist_policies_PM_to_G-20/articleshow/3717948.cms|title=Protectionism should not be allowed|publisher=Times of India|date=2008-11-16|accessdate=2008-11-16}}
- ^ a b “Fact Sheet: Summit on Financial Markets and the World Economy”, White House (2008-11-14). Retrieved on 16 November 2008.
- ^ “Declaration of the Summit on Financial Markets and the World Economy”, White House (2008-11-15). Retrieved on 16 November 2008.
- ^ “Doubts surface over G-20 rescue plan”, Euronews (2008-11-16). Retrieved on 16 November 2008.
- ^ “Brazil president hails G20 summit”, BBC (2008-11-15). Retrieved on 16 November 2008.
- ^ “Washington summit targets at crisis”, China Daily (2008-11-16). Retrieved on 16 November 2008.
- ^ “Chinese FM: G20 summit “significant” for world to tackle financial crisis”, Xinhua News Agency (2008-11-16). Retrieved on 16 November 2008.
- ^ “Un ensemble de principes pour mettre fin à la crise”, Radio France Internationale. Retrieved on 16 November 2008.
- ^ a b “Summit pledge to restore growth”, BBC (2008-11-16). Retrieved on 16 November 2008.
- ^ “PM terms G-20 summit as ‘very successful’”, The Economic Times (2008-11-16). Retrieved on 16 November 2008.
- ^ “An overdue power shift”, Live Mint (2008-11-16). Retrieved on 16 November 2008.
- ^ “Brown heralds G20’s ‘route map’”, BBC (2008-11-16). Retrieved on 16 November 2008.
- ^ “Gordon Brown heralds progress at G20 financial crisis talks”, The Guardian (2008-11-16). Retrieved on 16 November 2008.
- ^ “Financial Summit Agrees Measures to Fight Deep Recession”, VOA (2008-11-15). Retrieved on 16 November 2008.
- ^ “Barroso: “This is the beginning of a process” (Extra)”, Monsters and Critics (2008-11-15). Retrieved on 16 November 2008.
- ^ “The Interactive Panel of the United Nations General Assembly on the global financial crisis”. United Nations (2008-10-30). Retrieved on 2008-11-16.
External links
- Eurodad: Bretton Woods II conference FAQs
- Eurodad: IMF back in business as Bretton Woods II conference announced
- UN Interactive Panel on the Global Financial Crisis
- G20 official website
- G20 Info Centre (Univ of Toronto)
Financial crisis of 2007–2008
Main issues
Financial crisis of 2007–2008 · Economic crisis of 2008 · 2008 G-20 Leaders Summit
Specific issues
United States housing market correction · 2007–2008 world food price crisis · 2000s energy crisis · 2008 Central Asia energy crisis · Subprime mortgage crisis (timeline) · List of writedowns · Bankrupt or acquired banks · Global financial crisis of 2008 • List of entities involved in 2007–2008 financial crises
By country
Belgium · Iceland · Russia
Legislation and policy
Banking (Special Provisions) Act 2008 · Housing and Economic Recovery Act of 2008 · Economic Stimulus Act of 2008 · Emergency Economic Stabilization Act of 2008 · Troubled Assets Relief Program · 2008 United Kingdom bank rescue package · China Stimulus Plan
Company failures
New Century Financial Corporation · American Freedom Mortgage · American Home Mortgage · Lehman Brothers (bankruptcy) · NetBank · Terra Securities (scandal) · Sentinel Management Group · Washington Mutual · Icesave · Kaupthing Singer & Friedlander · Yamato Life · Circuit City
Government bailouts
and takeovers
Northern Rock (nationalization) · IndyMac Federal Bank · Fannie Mae (takeover) · Freddie Mac (takeover) · American International Group · Bradford & Bingley · Fortis · Glitnir · Hypo Real Estate · Dexia · Landsbanki · Kaupthing · ING Group
Company acquisitions
Ameriquest Mortgage · Countrywide Financial · Bear Stearns · Alliance & Leicester · Merrill Lynch · Washington Mutual · Derbyshire Building Society · Cheshire Building Society · HBOS · Lehman Brothers · Wachovia · Sovereign Bank · Barnsley Building Society · Scarborough Building Society
Reorganizations
ACC Capital Holdings
Related entities
Federal Reserve System · Federal Housing Administration · Federal Housing Finance Agency · Federal Housing Finance Board · Government National Mortgage Association · Office of Federal Housing Enterprise Oversight · Office of Financial Stability · UK Financial Investments Limited
Types of securities involved
Auction rate securities · Collateralized debt obligations · Collateralized mortgage obligations · Credit default swaps · Mortgage-backed securities
Financial markets
Secondary mortgage market
Terminology: Bailout · Credit crunch (credit crisis) · Economic bubble · Financial contagion - Financial crisis · Interbank lending market · Liquidity crisis
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