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Obama wants world economy reshape at G20

(Agencies)
Updated: 2009-09-21 21:21

WASHINGTON/BERLIN: 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 Group of 20 countries, which begins on Thursday.

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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 United States is proposing a broad new economic framework that it hopes the G20 will adopt, according to a letter by a top White House adviser.

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.

With US consumers now holding back on spending after house prices plunged and as unemployment climbs, 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.

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 that the White House wants.

"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," said the letter, which was obtained by Reuters.

Without naming specific countries, the proposal indicates the United States 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.

The IMF would be at the center of a peer review process that would assess member nations' policies and how they affect economic growth.

Some economists have worried that a trade dispute over new US import duties on Chinese tires could make it hard for leaders to renew their pledges to avoid protectionism, let alone discuss a major rethink of the world economy.

Nonetheless, 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," International Monetary Fund chief Dominique Strauss-Kahn told the Financial Times.

In Pittsburgh, the first of several expected anti-G20 protest marches took place with hundreds of demonstrators demanding governments create more jobs by spending more money on public works.

"(This) is a jobless recovery and there is the prospect of a permanent high unemployment economy." said Larry Holmes, of protest organizers Bail Out the People Movement.

Bigger protests are expected on Thursday and Friday.

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