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Obama wants G20 to rethink global economy

US President Barack Obama said on Sunday he would push world leaders this week for a reshaping of the global economy in response to the deepest financial crisis in decades.

In Europe, officials kept up pressure for a deal to curb bankers’ pay and bonuses at a two-day summit of leaders from the G20 countries, which begins on Thursday.

The summit will be held in the former steelmaking center of Pittsburgh, Pennsylvania, marking the third time in less than a year that leaders of countries accounting for about 85 percent of the world economy will have met to coordinate their responses to the crisis.

The US is proposing a broad new economic framework that it hopes the G20 will adopt, a letter by a top White House adviser said.

Obama said the US economy was recovering, even if unemployment remained high, and now was the time to rebalance the global economy after decades of US over-consumption.

“We can’t go back to the era where the Chinese or the Germans or other countries just are selling everything to us, we’re taking out a bunch of credit card debt or home equity loans, but we’re not selling anything to them,” Obama said in an interview with CNN television.

For years before the financial crisis erupted in 2007, economists had warned of the dangers of imbalances in the global economy — namely huge trade surpluses and currency reserves built up by exporters like China, and similarly big deficits in the US and other economies.

Washington wants other countries to become engines of growth.

“That’s part of what the G20 meeting in Pittsburgh is going to be about, making sure that there’s a more balanced economy,” Obama told CNN.

China has long been the target of calls from the West to get its massive population to spend more. It may be reluctant to offer a significant change in economic policy when Chinese President Hu Jintao (胡錦濤) meets Obama this week.

The US proposal, sketched out in a letter by Obama’s top G20 adviser, Michael Froman, calls for a new “framework” to reflect the balancing process.

“The framework would be a pledge on the part of G-20 leaders to individually and collectively pursue a set of policies which would lead to stronger, better-balanced growth,” the letter said.

The proposal indicates the US should save more and cut its budget deficit, China should rely less on exports and Europe should make structural changes — possibly in areas such as labor law — to make itself more attractive to investment.

To head off reluctance from China, Froman’s letter also supported Beijing’s call for developing countries to have more say at the IMF. The IMF would be at the center of a peer review process that would assess member nations’ policies and how they affect economic growth.

Calls for a new equilibrium are growing.

“We need to have rebalancing of growth and increase in consumption in the emerging markets to have enough growth in the short term,” IMF chief Dominique Strauss-Kahn told the Financial Times.

European officials renewed calls on the summit to curb bonuses paid to bankers. Massive payouts linked to risky investments are widely seen as a factor in the credit crisis. The EU should impose limits on bankers’ bonuses even if the US does not, European Commission President Jose Manuel Barroso said on Sunday.

Also See: Zoellick urges G20 to take action
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