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The two most significant developments at the G-20 summit on financial markets and the world economy in Washington relate to new prominent roles played by the European Union and the International Monetary Fund (IMF).
The Europeans, speaking at least this time with one voice, managed to convince the Americans of the necessity of some – but not all – tough regulatory measures they want to implement to control speculation and turbulence in global financial markets.
The IMF, fresh from a new cash infusion by Japan and courting more Saudi participation, is shaping up to become an “international Central Bank,” according to British PM Gordon Brown; able to help dozens of developing countries in distress. As the IMF is basically subordinated to the US Treasury, this development is more than welcome from an American point of view.
The G-20 is bound to surpass the G-7 to become the prime decision forum on the global economy. But the really tough decisions are left to the next summit in April 2009, with Barack Obama as US President.

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Europe, IMF take center stage

PEPE ESCOBAR, SENIOR ANALYST, TRNN: The Bretton Woods agreement in 1944 took two years of preparation. So, obviously, the second coming of Bretton Woods could not possibly happen on a single rainy day in Washington�in fact, less than three hours. This meeting was convened by the Bush administration a month ago. The ‘sherpas’ had less than a month to organize it. And each leader of the G-20 countries had only a few minutes to speak their minds. It ended in this room with a road map for a series of committees which will meet again in April 2009. The final communique, hammered for the past several days by several ‘sherpas’ fell short of a sweeping set of strict new regulations on financial companies and esoteric financial products. That’s what the European powers wanted. The Bush administration still insists this regulation would crush the global economy. Anyway, there’ll be a new college of supervisors, of financial regulators from several nations, keeping watch on the largest 30 transnational banks. That’s an idea floated by British Prime Minister Gordon Brown.

GORDON BROWN, BRITISH PRIME MINISTER: It’s necessary to give confidence that we are cleaning up the system based on the principles of transparency and accountability.

ESCOBAR: If there was a superstar in the show, it was this man on the right, French President Nicolas Sarkozy. The summit was his idea.

NICOLAS SARKOZY, FRENCH PRESIDENT (SUBTITLED TRANSLATION): Europe today has a very strong and visible political role. I’m convinced it will remain so in the long run. This is key, because the world needs an assertive Europe.

DOMINIQUE STRAUSS-KAHN, IMF DIRECTOR-GENERAL (SUBTITLED TRANSLATION): I think the Europeans for once are very united. That’s useful because the more united Europe is, the bigger its importance. When Europe moves as one, that carries a lot of weight.

ESCOBAR: On a more frivolous note, Sarkozy left Washington in a hurry so he could spend a pleasant Saturday in New York with his glamorous wife, Carla Bruni. The summit certainly marked the end of the rich man’s club, the G-7. Lula from Brazil stressed that the G-20 should be in charge from now on. Lula told world leaders at the White House dinner, “We need more production, more jobs, and more social inclusion.” In fact, that’ll be the agenda for the whole developing world. India, growing 7.5 percent this year, will increase its role as a motor of the global economy. China, after announcing a monster stimulus package, was happy there will be so many new rules reducing its control over the yuan, which everyone agrees is undervalued. Saudi Arabia and the emirates, they have around $1.5 trillion in capital. The IMF wants a big chunk of it. The Arabs want more say and more influence as part of the G-20. So we have Saudi money and Persian Gulf money making the IMF more powerful to bail out a lot of developing countries. Japan is also worried about poorer countries. They have offered to lend $100 billion to the IMF. So the IMF is in effect the big winner of this summit, assuming the role of an international central bank. That’s another formulation by Gordon Brown, the British prime minister. So the spotlight now turns to this man. He is in charge of helping the bulk of the world in dire straits. Dozens of countries that did not get a seat in Washington. It’s not an enviable position.

STRAUSS-KAHN (SUBTITLED TRANSLATION): The decision to move was a collective decision, followed throughout this weekend. The IMF is ready to help each country that wants to see how this plan will work. That depends on each country. There are countries in a difficult budgetary condition. They cannot do much. Others have some leeway, and they can advance. For months I encouraged the Chinese to take some action; a few days ago they launched a very considerable budgetary plan, very justified according to the Chinese situation, and also very helpful in terms of global growth. Other countries have different kinds of leeway. The role of the IMF is to encourage them all.

ESCOBAR: The big question now is how these new dozens of measures to regulate financial markets worldwide will be implemented. But that’s the subject of the next G-20 meeting in the spring of 2009, with Barack Obama as US president. We know as much at the moment. The revamping of financial capitalism worldwide will not happen without a more centralized control of unregulated financial magic.


Please note that TRNN transcripts are typed from a recording of the program; The Real News Network cannot guarantee their complete accuracy.

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Pepe Escobar, born in Brazil is the roving correspondent for Asia Times and an analyst for The Real News Network. He's been a foreign correspondent since 1985, based in London, Milan, Los Angeles, Paris, Singapore, and Bangkok. Since the late 1990s, he has specialized in covering the arc from the Middle East to Central Asia, including the wars in Afghanistan and Iraq. He has made frequent visits to Iran and is the author of Globalistan and also Red Zone Blues: A Snapshot of Baghdad During the Surge both published by Nimble Books in 2007.