Optimism fades after G20 ‘turning point’

An initial surge of optimism over a G20 recovery plan to lift the world economy out of recession was tempered yesterday, as markets digested the details.

US President Barack Obama hailed the deal struck at a key summit in London Thursday as a “turning point”, and US and Asian stock markets rose sharply after the leaders produced their agreement to the waiting world.

The Group of 20 developed and emerging economies agreed to commit one trillion dollars to the International Monetary Fund (IMF) and other global bodies to help struggling economies.

But London’s FTSE index failed to share the positive assessment of Obama, who left Britain Friday with his wife Michelle to attend a Nato summit in France and Germany.

After surging up more than four percent on Thursday, stocks in London opened down 0.35 percent Friday, although analysts said concerns about imminent US jobs data could be depressing the market.

In New York, the Dow Jones closed up 2.79 percent Thursday and Tokyo finished the day up 0.34 percent, approaching a three-month high.

The G20 agreement generally received a warm welcome from the British media.

The Times said the summit “took important steps to improving the machinery for coping with the financial crisis” while the paper’s economics commentator hailed the outcome as a “triumph”.

But across the Atlantic, the New York Times said the leaders “fell dangerously short” by failing to commit to new stimulus packages, an approach initially advocated by Obama but opposed by Germany and France.

British finance minister Alistair Darling insisted the summit had been an “essential part” of fixing the global economy but warned that the effect of the measures would not be immediate.

“You cannot oversell what happened yesterday, nor can you undersell it,” he told BBC radio.

The G20 agreement pledged 1.1 trillion dollars of additional support for the IMF and other global finance bodies such as the World Bank to allow it to shore up economies such as those in eastern Europe.

That includes 500 billion dollars in funding, 250 billion dollars in special drawing rights — a sort of overdraft facility — as well as 250 billion dollars of trade credit.

The eye-popping figures prompted The Sun newspaper Friday to picture British Prime Minister Gordon Brown as a dome-headed Dr Evil from the Austin Powers films saying: “And to save the world, I demand one trillion dollars.”

Source: AFP, London


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