WASHINGTON — Leaders from major advanced and developing countries sat down for several hours of tough talks Saturday, with plans to emerge with a series of actions to fix the financial system and keep the crisis from inflicting further damage to the world economy.
Group of 20 leaders sounded confident ahead of the morning plenary session that broad agreements could be reached on spurring growth and improving cooperation on supervision and regulation, though they acknowledged that some issues remained unresolved.
"Obviously, you know, this crisis has not ended. There's some progress being made, but there's still a lot of more work to be done," U.S. President George W. Bush told reporters as he arrived at the National Building Museum, where the summit is being held.
"I am pleased that we're discussing a way forward to make sure that such a crisis is unlikely to occur again," he said. "And I am pleased that leaders reaffirmed the principles behind open markets and free trade."
With the euro zone already in recession and the U.S. widely expected to follow, G-20 leaders are expected to call for further monetary and fiscal policy measures and agree to a plan of action on improving regulation and supervision of the financial system.
"There exists here a major common willingness to reassure that such a crisis will not be repeated and to revive the world economy as quickly as possible," German Chancellor Angela Merkel told reporters Saturday, according to AFP.
U.K. Prime Minister Gordon Brown said he expects a number of countries to announce stimulus packages, as well as an agreement to avoid protectionism. He hopes for that talks on the long-stalled Doha trade negotiations could be launched by year-end, as well.
Brown also expects a commitment on so-called "colleges of supervisors" to coordinate supervision of the world's largest financial institutions.
Still, the prime minister acknowledged that "there is a long way to go" before G-20 leaders can agree on a joint statement.
A high-ranking source in the French presidency told AFP the G-20 communique will have three positive messages: "support for the economy, new international regulation and reform of global governance."
The message would be "we won't leave any country behind," the source told AFP.
G-20 leaders also are expected to express support for the International Monetary Fund to take a bigger role as a global financial watchdog, and the fund sent them a joint letter with the Financial Stability Forum Thursday pledging to cooperate on a joint early warning system. It remains unclear whether any additional powers will be granted to the multilateral organizations, however.
The IMF has suddenly found its lending facilities back in heavy demand as countries such as Ukraine and Hungary have been caught up in the crisis. The fund announced plans Saturday to loan $7.6 billion to Pakistan as part of a broader rescue package.
To help shore up the IMF's coffers, Japan has offered $100 billion to the fund. The IMF has said that the $200 billion it already has on hand should be enough to deal with near-term demands for help, but it has described the G-20 meeting as an opportunity to demonstrate a willingness to support the fund.
Expectations of the first-ever summit of G-20 leaders have been scaled back after initially being built up as a potential "Bretton Woods II" meeting, in the hopes that it would result in an overhaul of the post-World War II economic order. That's partly due to Bush's lame-duck status and the decision by U.S. President-elect Barack Obama not to take part, though his representatives have arranged a full slate of meetings with foreign heads of state and other ministers on the sidelines of the main event.
In addition, gaps appeared to remain on how to fix the financial system. While continental Europeans are pushing to bring all financial actors under the umbrella of regulation, the U.S. and U.K. seem more focused on tackling macroeconomic issues, with regulation needing only an improvement, a French diplomatic source said earlier in the week.
Thus, the leaders aren't expected to resolve a range of hot-button issues, such as the scope of regulation, risk management and executive compensation, during the first of a series of meetings planned.
The G-20 will lay out a detailed action plan on addressing financial system weaknesses, with the aim of making progress by the end of March, before a second G-20 leaders meeting is anticipated, according to AFP.