World leaders have agreed a trillion-dollar deal to combat the economic downturn in a global recovery plan unveiled on Thursday.This content was published on April 2, 2009 - 20:28
In a clampdown on banking secrecy, countries meeting at a G20 summit in London also agreed to new lists of problem tax havens - one of which includes Switzerland.
The Organisation for Economic Co-operation and Development (OECD) divided countries into three list categories of "white", "grey" and "black": those who comply with rules on sharing tax information, those - like Switzerland - who say they will but have yet to act, and nations that have refused to change banking secrecy practices.
Under the agreement reached in London, countries refusing to adopt new rules on financial openness could face tough sanctions - including the withdrawal of investment funding by the World Bank or International Monetary Fund.
It follows growing concern that banking secrecy in tax havens has helped to worsen the economic crisis by disguising the true value of some global assets.
"Everyone around the table wants an end to tax havens," said French President Nicholas Sarkozy, adding that Switzerland could move off a grey list if it ratified OECD agreements.
The global action plan agreed by the group of the leading industrial and developed countries also includes tightening financial rules to bring hedge funds and credit rating agencies under closer supervision.
"This is the day that the world came together to fight back against the global recession. Not with words but a plan for global recovery and for reform and with a clear timetable," said British Prime Minister Gordon Brown, the summit host.
He said that although no new stimulus measures had been agreed, leaders had pledged to impoverished countries an unprecedented $1 trillion (SFr1.13 trillion) in loans and guarantees that are available through the IMF and other institutions.
In addition, the IMF would see its own resources tripled, with up to $500 billion of new funds.
The G20 also agreed a trade finance package worth $250 billion over two years to support global trade flows and announced the creation of a supervisory body to flag problems in the worldwide financial system.
Swiss President Hans-Rudolf Merz welcomed the G20 economic recovery measures but described the inclusion of Switzerland on a grey list as questionable and "unpleasant".
He said Switzerland would continue to closely monitor what happened abroad and said the G20 countries needed to be patient and wait for negotiations on double taxation agreements to be concluded.
Economics Minister Doris Leuthard responded on Thursday by saying Switzerland would continue to fight the automatic exchange of information about bank clients but added it was important that the Swiss financial industry was "clean" and could compete due to its "quality, efficiency and expertise".
The Swiss Bankers Association regretted the greylisting, saying: "Switzerland doesn't belong on such a grey list."
Attending his first international summit, United States President Barack Obama hailed the succession of London agreements as a "turning point in our pursuit of global economic recovery".
Sarkozy said the results were beyond what could have been imagined, while German Chancellor Angela Merkel called the measures "a very, very good, almost historic compromise" that would give the world "a clear financial markets architecture".
Nouriel Roubini, professor of economy at New York University, told swissinfo the overall result was a "net positive outcome" because the resources of the IMF were increasing, allowing it to help emerging markets that are in trouble.
"Given the collapse of global trade it was important to make a financial commitment to restoring trade finance," he said. "They also said they would do whatever was necessary in terms of micro-policy [for example, bank bail outs and economic stimulus packages] to get us out of this recession."
"I would have liked more aggressive commitment to policy action like monitoring fiscal stimulus. There is some disagreement between the US and Britain on the one hand and Europe on the other about how much fiscal stimulus must be done. Because of that the results are not as strong as they could have been."
Jean-Pierre Lehmann, professor of international political economy at IMD business school in Lausanne, warned that concrete action was needed.
"This all sounds very good but so did what came out of the [G20] November 15 meeting in Washington DC. You read the declaration... and then you realise that subsequent to it hardly anything at all ensued or indeed in some cases there were contradictions or reversals to what had been indicated."
"So what I cannot appreciate for the moment is how much of what is being said is actually actionable."
The Group of 20 first met in Berlin in December 1999. It was created as a response to the Asian financial crisis of 1997-98, which exposed the need to bring emerging market nations into the core of global economic discussion and governance.
The G20 represents around 90 per cent of global gross national product, 80 per cent of world trade (including EU intra-trade) and two-thirds of the world's population.
The Group met in Washington on November 15 and agreed a plan to try to restore global growth and bring order to a financial system reeling from the worldwide credit crisis.
The leaders pledged to "work together to restore global growth" but stopped short of any coordinated new fiscal measures, saying spending policies should be used to stimulate domestic demand rapidly, as appropriate for each country.
Swiss stimulus packages
The Swiss parliament has agreed two stimulus packages worth SFr1.6 billion in response to the economic crisis.
A first package to the tune of SFr980 million to boost private investment and prevent job cuts was agreed last year.
The second stimulus package worth SFr710 million agreed in March mainly targets infrastructure projects for road and rail. It also includes credits for research, energy, environment and tourism.
The government is due to decide in June on a third programme if the economic downturn continues.
In compliance with the JTI standards