Looking to take the first steps toward revamping a global financial system ravaged by crisis, leaders from the main industrialized and emerging economies gathered yesterday seeking common ground.
Yet the talks involving the Group of 20 leading nations faced a host of challenges to find unity from diverse perspectives of the US, EU and the main emerging nations.
European leaders have said they hope the Sao Paulo meeting will lay the groundwork for the start of reforms to be put in motion starting with a summit in Washington of G20 leaders next Saturday.
The US, in transition ahead of the inauguration of president-elect Barack Obama, has played down expectations for any major new initiatives in a crisis that began with a meltdown in the US real estate market and quickly spread to the banking system, becoming a credit crisis crippling the global economy.
The emerging nations meanwhile are arguing the crisis shows a need for wider participation in the management of the global economy beyond the Group of Seven wealthy nations.
The top emerging economies — Brazil, Russia, India and China — want “a reorganization of the world financial system,” Brazilian Economy Minister Guido Mantega told reporters on Friday.
The G7 is no longer sufficient to address global crises such as the one rippling around the world and the G20 should be strengthened, Mantega said after a meeting with his counterparts from the other so-called BRIC countries.
Mantega, summarizing his discussions with the finance ministers from Russia, India and China, said “we have come to the conclusion that there must be a reformulation, a reorganization of the world financial system.”
Specifically, he said, the system put in place by the 1944 Bretton Woods agreement needed to be changed to take into account the greater economic importance of emerging nations.
The G7 — Britain, Canada, France, Germany, Italy, Japan and the US — “is not sufficient,” he said.
The emerging nations want to see the G20 — which includes the G7 and the BRIC countries plus other significant economies such as Australia, Indonesia and Turkey — reinforced and elevated to a heads-of-state and heads-of-government level, above the finance ministerial status it has.
A joint statement by the BRIC finance ministers said they would “continue to take all necessary steps to lessen the impact of the recent turmoil on economic activity, aiming to preserve medium and long-term growth.”
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