Leaders of the Group of 20 richest economies and emerging economic heavyweights meet in Washington with hopes of creating a cooperative financial plan which will spark a global recovery.
G20 leaders are hoping their efforts days will lead to a global recovery
Outgoing US President George W. Bush kicked off the summit Friday, Nov. 14, with a formal White House dinner.
"We share a determination to fix the problems that led to this turmoil," said Bush, as the delegates dined on fruitwood-smoked quail and thyme-roasted rack of lamb.
The US has an interest in tightening financial regulations in order to restore confidence in the financial system "to guarantee that capital inflows continue," Germany's Finance Minister Peer Steinbrueck told reporters Friday on the sidelines of the meeting.
He emphasized the historical nature of the summit, where emerging nations like Brazil, Russia, India and China are represented.
Merkel and Steinbrueck want a German plan on the agenda
Financial reforms and regulations wouldn't be finalized until March 31, however, said Steinbrueck. A high-ranking French official told reporters the leaders planned to meet again in April.
However, there's no guarantee that Democratic President-elect Barack Obama -- who did not attend the summit -- would implement any promises that Bush makes, when he takes office on Jan. 20
Germany calls for bonus cuts, loan databank
Leaders of the Group of Twenty most important economies continue talks Saturday, where they will be debating the best way of tackling the on-going fallout from the crash last year of the US real estate market and how they can work together to save the global financial sector.
Germany is set to present its contribution to the global efforts: a brief calling for a revision of the way banking executives are paid and the creation of a worldwide loan registry.
Compiled by German financial experts, the brief was commissioned by Steinbrueck and German Chancellor Angela Merkel.
Led by Otmar Issing, a former chief economist of Germany's central bank, the Bundesbank, the experts in charge of the brief claim short-term performance bonuses for financial executives have been a significant cause of the global financial crisis.
The experts call for alternative incentives, such as increasing pension rights for good work. But Issing and the other experts said government regulations on pay would not work.
The group also includes a plan for a world database of loans in the brief, similar to the public land registries which in many countries show who owns land. Registries would allow governments to quickly see how big the credit risks in a nation were.
The Issing group also calls for annual public reviews by independent auditors of ratings agencies.
Merkel: Tough isn't a reason to give up
Merkel wants rapid action to stop recession spreading
Despite the emphasis on unity as a key component to success at the talks, Merkel said in a newspaper interview that she expects "difficult talks" but added it was crucial that the first steps towards improved financial regulation were taken soon.
"Of course these are going to be difficult talks (in Washington), but as Europeans we are used to that," Merkel said in an interview with the Sueddeutsche Zeitung's Friday issue. "But what will definitely not happen is that we simply ignore the problems just because they cannot be solved within 24 hours. It is a tough nut to crack but I will keep trying."
The German chancellor called for the improvement of international regulation, including strengthening of the role of the International Monetary Fund (IMF) and improved coordination between national authorities, in order to prevent a repeat of the mistakes of the past.
She added that there was a "danger" that the current reform zeal "is allowed to go to sleep as soon as the first signs of an (economic) improvement appear."
"But this will not happen. We have to implement the first steps in the coming months. The target is that in future all areas, all products and all businesses are properly regulated and supervised," Merkel added.
Merkel also said the developing economies must be given more responsibilities within the IMF. "(This) has to mean that we (the industrialized economies) allow them more possibilities to wield influence. That will happen at the expense of industrialized countries but that is how it goes," she said.
Europe sees small steps, not big solutions
Barroso admitted Europe was verging on slowdown
European Commission chief Jose Manuel Barroso echoed Merkel's mild pessimism by saying that he did not expect a "miracle" at the G20 summit but rather the first steps in tackling the direst problems facing the global economy.
"We cannot expect a miracle from this summit, which was Europe's idea, but will rather see the beginning of a process that will create a finished program in 100 days," he said an interview with the Sueddeutsche Zeitung on Friday. "This summit must not fail."
He acknowledged that Europe was "on the verge of a serious economic slowdown" and said the 27 European Union member states must roll out measures to shore up their real economies.
White House transition fuels uncertainties
The G20 leaders also face the problem of dealing with a US administration in its last days of power; one which cannot provide the world with any promises as to what the following government will attempt to achieve.
However, before Bush departs after eight years in office, he wants a plan of action to overhaul the international financial system and hopes it can be achieved at the G20 summit.
Out with the old, in with the new: But what happens next?
"The leaders attending this weekend's meeting agree on a clear purpose: to address the current crisis, and to lay the foundation for reforms that will help prevent a similar crisis in the future," Bush said Thursday, adding that the G20 must cooperate to improve banks' risk management practices, improve accounting rules for securities so that their "true value" is clear and harmonize accounting laws among nations.
Created in 1999, the G20 accounts for 85 percent of the world economy and about two-thirds of its population.
Its members are the United States, Germany, Japan, France, Italy, Britain and Canada, the European Union, Argentina, Australia, Brazil, China, India, Indonesia, Mexico, Russia, Saudi Arabia, South Africa, South Korea and Turkey.
International Monetary Fund and World Bank officials are also due to attend the summit in Washington.