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Brown backs tough G20 reforms

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25th Sep 2009
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The G20 ended on a tougher note than expected last week, as prime minister Gordon Brown declared that the recession was far from over, and world leaders remained committed to maintaining financial stimulus measures.

Brown, who was chairing the meeting of the summit in Pittsburgh, said that leaders had agreed that the G20 was now the world's 'premier economic organisation'. Leaders had agreed to put forward their contributions to a growth strategy that will be monitored by the International Monetary Fund.

“The big debate is about [whether] we continue with fiscal and monetary stimulus. Every country around the world is telling me we have to continue this stimulus”, he said before going to a meeting with fellow G20 leaders to finalise their communiqué.

“The recession is not over. It is not automatic that we will recover. We have got to ensure that the recovery happens. The path to recovery is very fragile, the banking system is fragile and there is fragility in the way that different economies are facing difficulties,” he said.

The communiqué is expected to say that governments need to 'prepare' their exit strategies and withdraw extraordinary policy support in “a cooperative and coordinated way [but only] when the time is right”.
The G20 is understood to have accepted the recommendations from the Financial Stability Board for a tight clampdown on executive pay, aimed at “aligning compensation with long-term value creation, not excessive risk taking”.

“The communiqué is tougher than people expected,” Brown said, adding that would include a mechanism to defer bonuses and to claw back payments where the activities had resulted in deterioration in the firm’s financial position
“There is no return to the bad old days of giving bonuses based in short-term speculative rather than long-term success,” he said. However it was unlikely that the G20 would accede to German and French demands for fixed caps on bonuses.

The G20 is expected to pledge that countries develop internationally agreed rules to improve both the quantity and quality of bank capital and to discourage excessive leverage by the end of 2010. These rules would be phased in as financial conditions improved and economic recovery was assured with the aim of implementing them by the end 2012.

The G20 communiqué is likely to be overshadowed by accusations by the United States and France that Iran had been building a secret uranium enrichment facility for several years. Brown accused Iran of “deception” and said the evidence showed that the facility was not consistent with peaceful energy production

Read more from our sister site's special correspondent in Pittsburgh at FinanceWeek.co.uk.

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