G-20 nations reach deal to avoid global downturn

By Martin Crutsinger and Harry Dunphy
Associated Press / April 16, 2011

E-mail this article

Invalid E-mail address
Invalid E-mail address

Sending your article

Your article has been sent.

Text size +

WASHINGTON — The world’s major economies reached an agreement yesterday on how to measure and prevent the types of dangerous imbalances that contributed to the worst global downturn in seven decades.

The deal was announced in a joint statement issued following a day of talks among finance officials from the Group of 20 rich industrial nations and major emerging markets such as China and Brazil. The effort will monitor countries and prod them to take corrective actions when imbalances in such areas as foreign trade or government debt rise to excessive levels.

French Finance Minister Christine Lagarde told reporters that the agreement is a significant achievement that will maintain the momentum to revive the global economy and prevent future financial crises. France is the head of the G-20 this year.

Lagarde said that in the beginning the monitoring process would focus on seven of the world’s largest economies but would eventually be broadened to include all nations in the G-20. She did not identify the seven nations but the expectation was that the group would include the United States, China, Japan, Germany, France, Britain, and India.

Much about the monitoring process, however, is still to be determined including whether countries found to have dangerous imbalances will be identified publicly.

There is also no enforcement mechanism so it is unclear what pressure can be brought to bear on countries found with dangerous imbalances. But officials stressed that just starting the surveillance process represented a huge breakthrough. They said it should help prevent the kinds of imbalances that in the past caused major troubles for the global economy such as the huge investment flows that helped fuel the subprime mortgage crisis in the United States.

“The subprime crisis in the United States — that’s exactly the kind of accident we want to avoid in the future,’’ Canadian Finance Minister Jim Flaherty said.