G20 Economic Summit - Whither the Global Economic Future ?

Marked by the threat of a deepening Global Financial Crisis (originated in the US), the ensuing economic slowdown, stock market crash, rising unemployment, an abysmal consumer confidence and an outgoing US President, there could not have been a more opportune time for the G-20 summit. The G-20 summit concluded last week.

The day before the G20 summit, Germany (which is Europe's largest economy) and 15 other economies that constitute the EuroZone were officially in recession (Two or more quarters of negative economic growth). Two days later, Japan was declared to be in recession for the first time in 7 years.

It's important for all to know what happened in the G-20 and how will it change the current gloomy scenario; how will it change our lives in the future and whether any of this will come back to haunt us again ...

The agenda of the summit was high on the prevailing economic crisis which is now global and yet, nascent in it's impact. The summit was attended by 20 nations who deliberated upon such issues.

G-20 is a group of 20 important global nations which account for 90% of the global economy and 75% of the global population. Therefore, the G-20 summit decisions taken on this forum will necessarily have a serious impact on citizens of member nations.

What can be done differently ... to prevent such a recurrence

This moot point bothered all G-20 member nations during their bilateral / multilateral meetings. The consequence was a plan of action which addresses the above concerns.

It recommends a multi-pronged approach :

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• An economic stimulus to prevent the slowdown from slipping into a recession
• A directed push onto a long-term growth path
• Regulatory reforms in the Financial system to prevent recurrence of this crisis in the future

In view of the above approach, all nations of the G-20:

• Agreed to prevent liquidity contraction by lowering interest rates
• Easing Domestic Monetary policies
• Provide Fiscal stimulus to raise consumer spend, followed by improving consumer and investor confidence
• The US in particular would go for a second round of economic bailout, large enough to reflate the economy by 2009
• Transparency and regulatory reforms in the new financial system.
• Cross-border institutions that currently remain outside any Supervisory framework would be included into the regulatory structure
• Greater Tranparency in CDS (Credit Default Swaps) market mechanism
• Support for Emerging market economies from the developed world.

With the new President-elect of the US waiting in the wings, Obama would have to do "whatever it takes" to kickstart the domestic economy which would propel the rest of the global economies.

As Obama recently said, "The basic principle that the government has a role to play in kick-starting an economy that has ground to a halt, is sound".