G20: $1.1 trillion injection to help world economy
Leaders from the world’s largest economies have pledged to work together to fight the economic crisis, with a $1.1 trillion (£681 billion) injection to restore lending, economic growth and jobs.
The G20 leaders, who have this week been meeting in London, also announced plans to treble the International Monetary Fund’s resources to $750 billion and give global trade a $250 billion boost. They also agreed stricter global financial regulation of financial firms.
In a statement, the leaders said: “Together with the measures we have each taken nationally, this constitutes a global plan for recovery on an unprecedented scale.”
The conference ended with a pledge from all 20 countries to:
· Restore confidence, growth, and jobs
· Repair the financial system to restore lending
· Strengthen financial regulation to rebuild trust
· Fund and reform our international financial institutions to overcome this crisis and prevent future ones
· Promote global trade and investment and reject protectionism, to underpin prosperity
· Build an inclusive, green, and sustainable recovery
“By acting together to fulfil these pledges we will bring the world economy out of recession and prevent a crisis like this from recurring in the future,” the G20 leaders said.
The pledge gave an immediate boost to global stockmarket shortly before they closed for the day; the FTSE 100 in London closed 4.3% higher, while the Cac 40 in Paris and the Dax in Frankfurt rose 5.4% and 6% respectively.
However, commentators say the announcement must be followed through with sensible measures.
The challenge will be how so many national governments, and regulators, can effectively work together to ensure the cash injections and pledges are implemented properly, says Stephen Haddrill, director general at the Association of British Insurers.
“The UK and London, in particular, have most to lose if the fine words of today become the shackles of the future,” he adds.
The G20 leaders also plan to establish a new Financial Stability Board to help advise global policy makers and oversee financial firms.
Iain Murray, director of projects and analysis at the Competitive Enterprise Institute in Washington, acknowledges that the G20 summit’s mission statement has some good points. But he adds: “[The plan assumes] that government has all the answers, and demonstrates that the world's leading governments recognise few boundaries.
"As such, not only does the communiqué promise far more than it can deliver – something the voters in G20 democracies should remember – but it may also impede global economic recovery.”
A market-weighted index of the 100 biggest companies by market capitalisation listed on the London Stock Exchange. It is often referred to as “The Footsie”. The index began on 3 January 1984 with a base level of 1000; the highest value reached to date is 6950.6, on 30 December 1999. The index is “weighted” by how the movements of each of the 100 constituents affect the index, so larger companies make more of a difference to the index than smaller ones. To ensure it is a true and accurate representation of the most highly capitalised companies in the UK, just like football’s Premier League, every three months the FTSE 100 “relegates” the bottom three companies in the 100 whose market capitalisation has fallen and “promotes” to the index the three companies whose market capitalisation has grown sufficiently to warrant inclusion. Around 80% of the companies listed on the London Stock Exchange are included in the FTSE 100.
Association of British Insurers
Established in 1985, the ABI is the trade body for UK insurance companies. It has more than 400 member companies that provide around 90% of domestic insurance services sold in the UK. The ABI speaks out on issues of common interest and acts as an advocate for high standards of customer service in the insurance industry. The ABI is funded by the subscriptions of member companies.