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.”