Brown tells world leaders to wake up ahead of G8

Published on Tuesday 7 July 2009 22:04

GORDON Brown has called for world leaders to wake up to the scale of the economic recession and take action to revive growth, ahead of a crucial G8 summit of world leaders that begins in Italy today.

The Prime Minister will fly this morning to the earthquake-hit town of L'Aquila, where Italian premier Silvio Berlusconi will host a meeting dominated by the economy.

One issue that China, Russia and Brazil are pushing to debate is the creation of a new global reserve currency, to halt the dominance of the United States dollar.

The G8 nations – Britain, the US, Germany, France, Italy, Canada, Japan and Russia – will be joined by the "plus five" group of emerging economies, China, India, Brazil, Mexico and South Africa, to discuss climate change and development.

Yesterday, the latent tensions between Russia and the US were underscored after Barack Obama met Russian prime minister Vladimir Putin.

After the meeting in Moscow, the US president admitted that, while he wanted a "new partnership" with Russia, there would not be a "meeting of minds any time soon" on divisive issues.

In an interview ahead of the summit, Mr Brown appeared to play down the prospect of much discussion on a new currency.

"Countries are free to put forward any proposals they have got," he said. "But I would have thought people are more interested in the detail of how we can get growth going now.

"That demands we look at the relationship between surplus and deficit countries, but it also demands we tackle commodity prices, stop protectionism, that we can start banks lending again."

The immediate concern was getting out of recession and the dangers posed by high oil prices, protectionism and lack of credit, he said.

Having refused to rule out curbs on speculative trading in oil, Mr Brown said: "This is a second wake-up call for us. We have to deal with the challenge of resuming growth in the world economy. Banks must lend, trade must resume, with protectionism exposed wherever it is happening, and we must keep commodity prices that are at a level that enables growth."

Mr Brown's view that countries should be led out of the recession through fiscal and monetary stimulus is not shared by Germany, which has advocated an "exit strategy" from this.

Mr Brown, who hosted the G20 summit in April, said the G8 had to work together to get oil prices down, and he did not rule out putting in place curbs on excessive speculation.

"Where there is unfair speculation in the market or abuse of the market, we would be prepared to act. We continue to look at these measures," he said.

Leaders are also expected to discuss climate change, although binding agreements on carbon emissions are unlikely.

Mr Brown admitted it would be difficult to strike an agreement on trade.

"The rising number of protectionist tendencies – either people banning imports or putting tariffs on imports – are a difficulty for the world economy," he said.

He will push for countries not to forget about their commitments to the developing world, although not one of the G8 countries has yet met the United Nations target of giving 0.7 per cent of its national income in aid.

"We used to have the song Feed the World … it was about feeding Africa. In future years, Africa can feed the world, if we can give it the agricultural investment," he said.

Iran will be a dominant topic at the three-day summit, and the UK will hope to gather support in its stand-off with the Islamic Republic over the detention of British embassy workers in Tehran.

Leaders will doubtless review the prospects for nuclear weapons reductions after this week's talks between Mr Obama and Russian president Dmitry Medvedev.

But yesterday, the US president held a slightly frostier breakfast meeting with Mr Putin, Mr Medvedev's predecessor, who is still widely thought to control the Kremlin.

The two countries are at odds over US plans to push ahead with a missile defence shield based in Eastern Europe, which Moscow fears is aimed at its people.

Mr Obama made clear he disagreed with Mr Putin's assessment of Russia's clash with Georgia last year, but he called on Moscow to "forge a lasting partnership", while acknowledging the differences between their two countries.

Mr Obama said he found the Russian prime minister to be "tough, smart, shrewd, very unsentimental, very pragmatic, and on areas where we disagree, like Georgia, I don't anticipate a meeting of the minds anytime soon". After breakfast at Mr Putin's country home, Mr Obama sped back to central Moscow to tell the graduating class of the prestigious New Economic School that the US and Russia were "not destined to be antagonists".

He explained: "I believe on the fundamental issues that will shape this century, Americans and Russians share common interests that form a basis for co-operation."

Mr Putin said Russia linked its hopes for a better relationship with the US to Mr Obama's presidency.

These summits are not usually seismic events, but there's a 30% chance this one really could be

A MASSIVE evacuation plan is in place to extract the 40 world leaders from the G8 summit, should the Italian town of L'Aquila, left, be struck by a repeat earthquake.

World leaders are staying in police barracks in the town that was known as "tent city" after 300 people were killed and 54,000 displaced by an earthquake of magnitude 6.3 in April. Aftershocks of as high as magnitude four were felt in the town over the weekend, and there is a 30 per cent chance of a new seismic event.

Ahead of the leaders' arrival today, a 60-mile highway from Rome to L'Aquila was dotted with police officers yesterday. It was part of Italy's massive efforts to avoid a repeat of the G8 in Genoa eight years ago, when protesters clashed violently with police. One protester was killed.

There has been criticism of the huge operation, not least from residents of L'Aquila, who feel that the resources should have been spent on rebuilding their homes and infrastructure, rather than on the three-day talk-fest.

Leaders' spouses, including Michelle Obama and French president Nicolas Sarkozy's Italian-born wife, Carla Bruni, will participate in events on the sidelines of the summit. The programme for them includes a tour of sites in L'Aquila, a visit to museums in Rome and a meeting with United Nations food agencies based in the Italian capital on the role of women in fighting hunger.

Some are also expected to have audiences with Pope Benedict XVI.

Summit discussions to take in wide spectrum of agendas

Economy

THE global reaction to the recession will be the number one issue discussed by G8 leaders today.

There will be opening talks on the crisis with a two-hour working lunch. Leaders will be expected to discuss signs of the end of recession, financial regulation and the Doha trade round.

Gordon Brown will argue that constrained bank lending remains a threat to recovery and world leaders need to step up the fight against protectionism. He will warn against complacency, a view backed up by the World Bank president, Robert Zoellick.

In a letter to leaders, Mr Zoellick warned 2009 could still be a perilous year. "Recent gains could be reversed easily, and the pace of recovery in 2010 is far from certain," he said.

Financial regulation will also be discussed.

Aid

THE United States wants G8 leaders to commit $15 billion (9.3bn) over several years for agricultural development in poor countries to fight food insecurity.

Campaigners want the UK to remain on track to spend 0.7 per cent of national income on aid by 2013 and for other countries to get back on track to reach aid targets.

Oxfam Scotland campaigns manager Malcolm Fleming said: "People will be surprised at how small a portion of their wealth the worlds' richest countries give on aid." The UK contributes 0.43 per cent of its income, the largest proportion of any G8 member, while the US pays 0.2 per cent.

Currency

CHINA, Russia and Brazil want to start a debate on seeking an alternative new global reserve currency as an alternative to the dollar.

Kremlin economic aide Arkady Dvorkovich said China and Russia would "state their stance that the global currency system needs smooth evolutionary development". Brazilian president Lula da Silva said he was keen to explore "the possibility of new trade relations not dependent on the dollar". The debate is highly sensitive in financial markets, which are wary of risks to US asset values. But nations promoting the debate take care to avoid undermining the dollar, as much of their own reserves are in US dollars.

Leaders seek oil cost talks

THERE are major concerns about the volatility of oil prices. French President Nicolas Sarkozy and Gordon Brown have called for talks with oil-producing countries on ways to reduce the instability of prices, which plunged from about $147 a barrel last July to $32 late last year, then to $73 last week.

Mr Brown said: "The most important commodity the world needs is one of the most volatile and unstable. We have to look at how we can change this." He called for a clampdown on any mechanisms triggering "undue speculation".

Environment

Climate change and environmental initiatives will be one of the top three subjects discussed. The talks will be a precursor to December's UN climate change summit in Copenhagen, which is due to produce a replacement for the 1997 Kyoto pact. Leaders will try to narrow differences over cuts in greenhouse gas emissions and funding for low-carbon technology.

There is reluctance from China, India and Brazil to sign up to tougher targets. They argue that they are playing catch-up with richer nations.

Iran

G8 leaders will have no power to impose sanctions on Iran after the regime's violent crackdown on opposition protests. But they are likely to issue a joint statement condemning the violence.

Leaders are also expected to focus on how to balance diplomacy with tougher action, and will discuss whether nations such as Germany and Italy, which have significant economic ties to Iran, would be willing to back sanctions over its nuclear programme. Russia is also under pressure to take a tougher position.

In numbers

6.3 The magnitude of a recent earthquake in L'Aquila, the town where the summit is being held.

30% The chance of another earthquake in L'Aquila now – up from 13 per cent in June.

2 The figure, in degrees Celsius, to which leaders want to limit the rise in global temperatures by 2050.

9.25bn What the G8 hopes to announce in aid spending on agriculture and food security over the next three years.

40 The number of world leaders who will attend the G8.

70 That's by how many times more rich countries spent bailing out banks than is handed out in international development aid annually.

18 The age of the model/actress whose birthday party Silvio Berlusconi controversially attended.