2009-09-25
Mitch Potter
PITTSBURGH–Canada will be the birthplace for the rise of the world’s new pre-eminent world economic institution, the Star has learned.
The moment will come June 25-27 in an unusual gathering of world leaders in Huntsville, Ont. Originally planned as a G8 summit, the event will now include the full G20. That group includes the biggest industrial countries, plus major emerging economies such as China, Brazil and India.
Details of the two summits were still being worked out last night, a senior official in Pittsburgh said.
Prime Minister Stephen Harper was expected to make a formal announcement this morning, when he is to hold a joint news conference with his Korean counterpart.
The G8 will continue to meet on matters of common importance such as national security, a U.S. administration official told The Associated Press.
The decision comes as world leaders gather in Pittsburgh for their third summit in a year to reshape the governance of the world’s economy following the worst financial crisis since the Great Depression.
The transfer of influence to the broader group reflects the fact that the richest industrial nations now lack the sway to govern the world economy alone after their excesses sparked the turmoil that tipped the globe into a recession.
Instead, many are now relying on China and other countries outside their ranks to drive the recovery.
“What we are trying to do is create a system for economic cooperation across the world,” British Prime Minister Gordon Brown said in an interview with U.K. broadcasters yesterday.
“We have this one chance to make a huge success of international cooperation.”
The G20 accounts for about 85 per cent of global gross domestic product and was created after a spate of currency devaluations plagued emerging markets from Russia to Thailand in the 1990s. The G8 accounts for about two-thirds of global GDP.
G20 leaders met for the first time in Washington last November and again in April in London as they sought to rescue the economy from its slump.
At the onset of the financial crisis, central bankers used talks near Cape Town. South Africa, in November 2007 to hatch a plan to inject more dollars into markets.
Meanwhile, senior government sources said Canada intends to resist European pressure to deliver a harsh regulatory spanking against the high-rolling bonus culture that contributed to last year’s global financial meltdown.
Instead, Ottawa is working for a G20 outcome favoured by U.S. officials, one that would regulate against risk by instituting a system of “clawbacks” to ensure executive bonuses are conditional upon long-term financial performance.
The issue has become a source of tension as the leaders of the world’s 20 largest economies sit down today to coordinate the next phase of stimulus measures and grapple with regulatory reform, with France pressing for hard caps on executive compensation.
A senior Canadian official downplayed the division in a background briefing for journalists, noting that the goals on compensation remain the same.
In a separate development, Harper announced last night that Canada is extending an additional $2.8 billion in loan guarantees to the African Development Bank.
The temporary action will backstop the regional bank’s efforts to revive developing economies severely impacted by the global recession.
“Canada is the first country to have responded to a critical need of regional banks in this innovative way,” Harper said in a statement. “Our support recognizes efforts by the African Development Bank to ensure it has sufficient resources to respond quickly to the demands of its borrowing members while it continues its poverty reduction efforts.”
The move triples the level of Canadian support to the African bank. Ottawa signalled Harper will be “promoting a focused agenda” calling for continuing stimulus measures, concrete action “to keep trade flows expanding” and emphasizing the need for stronger domestic financial sector regulation throughout the G20.
Officials in Pittsburgh said the Canadian banking model has come under positive inspection in recent weeks as other G20 governments look to establish new regulatory standards that ensure financial institutions maintain a higher ratio of capital reserves – in effect, a Canadian-style rainy day fund to better withstand financial downpours.
“Global standards will be going up once the recovery is assured,” a Canadian official said.