Europeans leave G20 summit with huge task but high hopes

EUROPEAN PARTICIPANTS in this weekend's G-20 global economic summit were buoyant as they left Washington, expressing satisfaction that they had won all the major arguments, writes Denis Stauntonin Washington.

The first European achievement was persuading a reluctant US president, George W. Bush, to hold the meeting a few weeks before he hands over power to Barack Obama. Only a day before the summit Mr Bush was lowering expectations and warning against an excessive role for government in dealing with the economic and financial crisis.

Among the steps agreed by the leaders is a commitment to review executive compensation schemes that reward excessive risk-taking.

French president Nicolas Sarkozy said it was remarkable to see the US agreeing to consider such action and European Commission president Jose Manuel Barroso acknowledged that there was a risk of European triumphalism.

Other proposals in the action plan, from increased supervision of banks and credit rating agencies to more global co-ordination of financial regulation, also reflect a European approach to the crisis.

"It's true that there is more convergence around some principles that we in Europe believe in," Mr Barroso said.

US officials stressed that the leaders affirmed their commitment to free trade, promising to revive the Doha trade talks, and made clear that free market principles would guide their response to the economic crisis.

"In advance of the summit there had been much discussion - was this going to result in an assault on capitalism or the death of capitalism, or the revamping of the free market system. Quite the contrary," one senior US official said. "There was recognition by all leaders that the reforms they were discussing would only be successful if grounded in . . . a commitment to free-market principles.

All sides agreed on the need to reform the International Monetary Fund (IMF) so that emerging economies such as China, India and Brazil should be better represented. Europeans remain divided on the idea of replacing the French, British and Italian seats in the Group of Seven with a single EU seat.

The five-page statement that followed the summit was unusually detailed. Mr Barroso acknowledged, however, that the plan represents a series of political commitments which must now be implemented by individual governments and by supra-national bodies such as the EU and the IMF.

The first steps in the plan are due to be completed by next April, at which time Mr Obama will be in the White House.

In the meantime, each of the major economies faces its own tests. In the US, Democrats favour a government bail-out of the ailing car industry in Detroit, but Mr Bush is resisting such a move.

In Europe, finance ministers meet later this month to discuss the easing of euro-zone budget restrictions to allow national governments to boost their economies by spending more.