The Group of 20 will become the forum for global economic management, giving rising powers such as China more clout, and roll out tougher rules on bank capital by the end of 2012, a draft communique said today.
Ensuring and sustaining economic recovery topped the agenda at a two-day Pittsburgh summit of the world's richest nations and emerging powers such as China, India and Brazil.
The G20 countries, which account for 90 per cent of the world's output, vowed to keep emergency economic support in place until a recovery was secured, according to the draft communique.
Suggestions that any exit strategies from such measures would still be a way off caused the dollar to fall to a 7-1/2-month low beneath the key 90-yen level today.
Investors had worried signs might emerge from the summit that countries were getting ready to start raising interest rates or reversing other massive economic stimulus measures, but US stocks were down slightly today.
The communique is subject to change.
The G20 leaders will issue the final version when they wind up their meeting late tonight.
US President Barack Obama's first G20 summit as host was testing his ability to juggle domestic and foreign policy.
Disclosure of a second Iranian uranium enrichment plant gave Mr Obama, with the leaders of Britain and France at his side, an opportunity to press for united action against Tehran over its disputed nuclear program.
The G20 agreed to rein in financial industry excesses that triggered the credit crisis two years ago.
Tighter rules on how much capital banks must have to absorb losses should be ready by the end of 2010 and will be phased in during the following two years, the draft said.
The document also tackled the contentious issue of bankers' pay schemes, blamed for fostering a high-risk corporate culture that led to heavy losses and taxpayer-funded bailouts.
It suggested linking pay to "long-term value creation, not excessive risk-taking."
The draft did not mention direct caps on pay, as proposed by some European leaders. French officials said the summit had not reached a final accord on executive pay.
The document said the G20 would try to secure a deal next year in long-running world trade talks. Similar pledges have been made at a number of international gatherings, so far without result.
In another boost for countries such as China and India, the G20 unexpectedly moved close to a deal shifting more voting power at the International Monetary Fund to some developing countries, recognizing their growing clout.
In return for giving emerging economies greater say, the draft communique suggested, the G20 won their commitment to do their part in rebalancing the world economy.
That rebalancing act involves the debt-laden United States saving more and export powerhouse China consuming more.
The draft said G20 countries with either "sustained, significant" surpluses -- a description that fits China -- pledged to "strengthen domestic sources of growth."
By the same token, countries with big deficits -- such as the United States -- pledged to support private savings.
But it was unlikely any countries would consent to G20-imposed rules on how to run their domestic economy.
Some rebalancing is already happening due to the recession. US consumers, long viewed as the world's "shoppers of last resort," have cut spending as household wealth has shrunk, while China is spending about $600 billion (€408 billion) to stimulate its economy and make it less dependent on exports.
The global economy appears to be recovering faster than many economists had predicted, largely thanks to furious interest rate cuts, emergency central bank lending and roughly $5 trillion (€3.4 trillion) in government stimulus money.
But with unemployment high and banks still struggling to absorb heavy losses primarily from failing US mortgage loans, the pressure is on the G20 to sustain economic assistance and coordinate how and when the emergency stimulus is phased out.
"We designated the G20 to be the premier forum for our international economic cooperation," the draft communique said.
The move means the G20 supplants the G7 and G8, institutions dominated by rich Western economies that will now be forums for discussing geopolitical issues, diplomats said.
The draft showed leaders endorsed an agreement on phasing out subsidies for fossil fuels to help combat global warming, but with no fixed date for the change.
Many G20 governments, including countries such as China, India and Russia, give tax breaks and direct payments to companies that help them produce coal, oil and other fossil fuels that cause greenhouse gases blamed for global warming.
Reuters