PITTSBURGH - World leaders of the Group of 20 (G20) agreed Friday that the bloc of advanced and emerging countries will permanently replace the long-standing Group of Eight (G8) as the main body to discuss economic issues.
The decision comes as the G20 leaders began a day of talks in Pittsburgh, Pennsylvania, hosted by US President Barack Obama, to assess the state of the world economy, agree to far-reaching financial regulatory reforms and consider financing efforts to combat climate change.
The leaders are set to announce a compromise that would impose far-reaching curbs on bank bonuses, with possible penalties for banks that don’t comply with the new rules, according to German government officials. This has been a key demand of the European Union.
Drawing on the lessons of the year’s financial crisis, the leaders are also expected to pledge new international rules on capital standards for banks, in order to stop financial firms from holding too few funds to survive a downturn.
Countries that haven’t adopted the Basel II rules on capital requirements, including the US, will pledge to do so by 2011. The Basel II accord was agreed upon earlier this decade and has been in place in most European countries since 2007. The US is also pushing for the rules to be strengthened further in coming years.
Before the day’s talks even began, leaders reached what the White House called an “historic agreement” to secure the G20’s future as a place for discussions on the global economy. The bloc shot to prominence last year as the world’s worst recession in decades forced leaders to broaden their cooperation beyond just industrial nations.
The commitment represents a major victory for emerging economic giants like India, China and Brazil. The G20 countries together make up about four-fifths of global economic output.
“It is very difficult in the world of today for you to continue with G8 only without taking in account the importance of Brazil, China, India, many in the world economy,” Brazilian President Luiz Inacio Lula da Silva told the US broadcaster PBS Thursday.
The grouping, which was earlier known as Group of Seven (G7), has met annually for more than 30 years. It consisted of the largest developed economies: Britain, Canada, France, Germany, Italy, Japan and the US. In 1997, Russia formally joined them, making it the Group of Eight (G8).
Leaders said the G20 would become the “premier forum for their international economic cooperation”. Leaders have long pledged to keep the G7 and G8 as a place to discuss security issues.
German Chancellor Angela Merkel said she was satisfied with the compromises reached so far in the G20 summit to rein in the risky practices of financial firms in future.
The G20 talks were overshadowed by Iran’s admission that it had a second nuclear facility. Obama, British Prime Minister Gordon Brown and French President Nicolas Sarkozy appeared together Friday to condemn the development, before heading into their G20 meetings.
Obama called it “disturbing” and said the size of Iran’s second nuclear plant was “inconsistent” with use for civilian power. US officials alleged its sole purpose was to give the Islamic state the option to produce material for atomic weapons.
The G20 summit led to scattered protests in parts of Pittsburgh as the meeting opened with a dinner Thursday night. More than 4,000 police have been mobilised for the summit in the city of about 300,000.
European Union officials warned that little progress was being made on narrowing differences on climate change. EU Commission President Jose Manuel Barroso said Thursday that efforts to reach a new global climate treaty by a December summit in Copenhagen were in jeopardy.
Leaders of the G20 first met in November 2008 in Washington in the wake of the financial crisis that started in September on Wall Street and gathered again in London in April this year.
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