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G20 backs early-warning plan against future economic crises

Finance ministers from the world's 20 leading economies have agreed to put their economic policies under greater scrutiny in order to avert a repeat of the global financial crisis. Germany will be one of them.

South Korea's Minister of Strategy and Finance Yoon Jeung-hyun, France's Finance Minister Christine Lagarde, and International Monetary Fund (IMF) Managing Director Dominique Strauss-Kahn

Lagarde, middle, said she was pleased with the G20 deal

The world's economic powerhouses have agreed to put the policies of seven major economies under the microscope in an attempt to prevent another global financial crisis.

The agreement came at a meeting of finance ministers from the Group of 20 leading economies held in Washington on Friday, April 15.

Finance minister posing for the picture

G20 leaders agreed to turn the spotlight on the big economies

Under the deal, the International Monetary Fund will look at national levels of debt, budget deficits and trade balances to determine if a nation's policies are putting the global economy at risk and should be changed.

French Finance Minister Christine Lagarde, who chaired the meeting, said the agreement marked "huge progress" on the path to more balanced world growth as seven major economies would automatically be subject to review.

"The net is a little bit tighter for those countries that are considered of systemic importance," Lagarde said.

That list is understood to include the United States, China, Germany, Japan, France, Britain and India. These countries have the largest impact on the global economy, each making up more than 5 percent of the combined output of the G20.

All members of the G20 will be watched, and if red flags are detected they, too, could come under greater scrutiny.

Concerns in Germany

Axel Weber, outgoing Bundesbank president

Bundesbank President Weber voiced European concerns

Bundesbank President Axel Weber warned in Washington that European countries as well as broader members of the G20 are a long way from bringing their finance systems up to full stability.

"We are in year four of the crisis," Weber said. "We are not yet ... in year one after the crisis."

Overall, the G20 is optimistic about the global economic recovery, but the crisis in Japan and turmoil in the Middle East have increased tensions in energy prices, the ministers said in a communiqué following the meeting.

G20 countries represent 85 percent of the global economy.

Author: Joanna Impey (AFP, dpa, Reuters)

Editor: Toma Tasovac

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