ANALYSIS:Much finger-pointing has been going on as the G20 meets to tackle the global crisis, writes Proinsias O'Mahony
THE G20 group of nations meets to discuss the financial crisis in Washington today, with developing countries likely to press for a reformed global financial system that more accurately reflects "changing economic weights".
Despite last weekend's consensual statement that G20 members would co-operate to "maintain financial stability and support global growth", much finger-pointing has been going on. Brazilian president Luiz Inácio Lula da Silva said that "problems that originated in the advanced countries" had "infected" the world, necessitating a "substantial change of the world's financial architecture".
Asked whether the G20 would supplant the G7 group of the world's richest nations in global economic affairs, Brazilian finance minister Guido Mantega said the issue had "not yet been resolved" but the G20 "is a strong candidate to co-ordinate actions".
This week's meeting will bring together the G7, the European Union and 12 other economic powers - Argentina, Australia, Brazil, China, India, Indonesia, Mexico, Russia, Saudi Arabia, South Africa, South Korea and Turkey.
IMF chief Dominique Strauss-Kahn and World Bank President Robert Zoellick have both accepted the need for emerging countries to have a bigger say in matters. However, the extent of that involvement remains moot. Mr Zoellick said recently that the G20 was "too unwieldy", going on to argue for a flexible arrangement between the G7 and other major economies. Mr Mantega, however, warned of being invited to G7 meetings "only to take part in the coffee breaks".
Transforming existing institutions like the World Bank and the IMF, Mr Mantega said, was preferable to creating entirely new institutions. If anything, a restructured IMF is expected to have a greater role in international finance going forward. French president Nicolas Sarkozy, who pressed the US into convening this week's summit, wants to give it "primary responsibility to recommend the necessary measures to restore confidence and stability" whilst Britain's Gordon Brown has said that the IMF needs additional funds and instruments to support countries in difficulty.
Extensive regulatory reform is also likely to be top of the agenda on Thursday. Russia's finance minister Aleksey Kudrin is arguing that new regulatory bodies with mandatory rules and regulations for all countries would help prevent future crises, while Gordon Brown is looking for a panel of regulators to supervise the 30 biggest banks in the world. German chancellor Angela Merkel is calling for a new "constitution" governing financial markets. European leaders advocate regulation of hedge funds and other players in the so-called shadow banking system - that is, non-bank financial institutions - whose use of leverage and complex derivative instruments has caused much angst in financial and political circles.
The financial crisis is now in its second year, with institutions enduring $691 billion in financial write-downs.
A move towards common accounting rules and standards as well as registration of credit rating agencies, whose awarding of AAA ratings to risky subprime debt packages was a prime factor in the financial crisis, is also expected.
Not everyone shares the European taste for regulation, however. The Bush administration is wary of any move towards a global financial overlord. Europeans will be hoping that US president-elect Barack Obama is more receptive on the issue, although emerging giant China, too, has reservations, with Chinese premier Wen Jiabao recently cautioning on the need to "handle correctly the relationship between financial innovation and regulation".
Many Asian and other emerging-market nations, whose banks did not indulge in the lending frenzy seen in western countries, are thought to share China's scepticism.
With all of next year's global economic growth predicted to come from emerging countries, Strauss-Kahn said it was "fair to look at this growth coming from emerging countries and to try to support it because it is the only growth that we will have".
China, whose €460 billion stimulus plan propped up global markets on Monday, accounted for 27 per cent of last year's global growth, despite accounting for just 5 per cent of the global economy.
With countries still far from unanimous on the issues at stake, many dismiss talk of a new financial world order as hyperbole. "We are not going to create a new international treaty," Strauss-Kahn said recently, pointing out that the international economic system inaugurated at Bretton Woods in 1944 took two years to prepare. That means that this week's meeting is likely to be a springboard for more substantive discussions once Barack Obama takes office, with important declarations of principle rather than any tangible agreement likely to be the result.
Nevertheless, reforming the international economic system is a question of when rather than if. "We'll have to change the tyres of the car with the car moving," said Mantega. "This means in 60 to 90 days we'll need the solutions for new financial regulation".