European Commission President José Manuel Barroso seemed broadly satisfied with the 'Framework for Strong, Sustainable and Balanced Growth' agreed at the summit, adding however that he did not hide his concern "at the slow rate of progress" on regulating finance.
Consensus among the G20 leaders centred on agreeing to exit strategies only once a durable recovery was in place and doing so in a co-ordinated fashion, agreeing that the timing for each nation would be different.
However, the build-up to the summit, laced with tough reprisals for bankers and strict proposals from European leaders, had led to predictions of an altogether more comprehensive package.
Loose agreements
Agreements cited in the summit's communiqué overwhelmingly focused on financial markets. Global trade imbalances, a key issue on the US agenda, were loosely addressed in an agreement by leaders to boost domestic demand.
Global trade imbalances have long been a bugbear of several US administrations in the belief that Americans carry an uneven burden of global consumption. Obama and Bush before him had hinted that the depth of this recession was due to the lack of domestic demand in export-heavy economies such as China and Germany. On this point, the G20 agreed to boost demand and adopt a 'wait and see' attitude.
Potential successes
The US signed up to a commitment to adopt an international framework on capital requirements at banks by 2011, an agreement the EU has been seeking since the 1990s. The Union adopted the Basel II accords as part of the its Capital Requirements Directive in June this year.
Higher capital requirements are also to be set on derivatives trading, which will prove a complex task at international level given that the failure of both Lehman Brothers and American International Group (AIG) were attributed to the high volume of derivatives trading at the banks.
Proposals coming from the European Commission, which held a consultation on the issue, say that derivatives trading should go via a clearing facility.
Wins for Germany and China
Large banks that are "too big to be allowed to fail" and would subsequently take risks to recover quickly were German Chancellor Angela Merkel's primary concern in the run-up to the summit. The G20 agreed to reform insolvency procedures for large banks, including a provision for "living wills", which will require large banks to say exactly how they will be wound down in the event of insolvency.
The first agreement to emerge from the summit was China's increased share of the voting quota on the IMF's executive board. The Group of 20 agreed on a five percentage point shift in International Monetary Fund voting power from controlling developed countries to under-represented countries.
The summit communiqué also did not exclude further trade-offs in the future, a very large bone of contention for EU member states which are reportedly already worried by plans to limit Europe's current share on the board. Smaller countries such as Belgium fear the current state of play could see their seat disappear entirely.
One other institutional agreement was reached. The Financial Stability Board, a policy arm of the G20 made up of central bankers and financial regulators, will in future have a broader mandate in coordinating and monitoring financial regulations and will send out early-warning alerts on risk-taking. It also had the unenviable task of laying down guidelines to peg bonuses to the performance of institutions, allowing for clawbacks where needed.
No tax and no bonus caps
The EU, which was represented at the summit by UK, France, Germany, Spain, Netherlands, Sweden, as the current holder of the EU presidency, and the European Commission, went to Pittsburgh with very specific aims, most of which were blown to the wayside. Two policies which received the most attention from politicians and policymakers were a proposed financial transactions tax and bonus caps (EurActiv 17/09/09).
A financial transactions tax, a measure proposed by German Finance Minister Peer Steinbrück, did not make it into the summit's final communiqué. The tax, based on the Tobin tax proposed by an eponymous economist, is intended to penalise short-term speculation in financial trading. Steinbrück's proposal, at 0.05%, was half that of the original Tobin tax.
Leaders instead agreed that the International Monetary Fund should compile a report on how banks can raise money for budgets.
Germany and France went to the summit with a well-versed plan to lay down caps on bankers' bonuses. Generous remuneration structures at financial institutions are widely held as a factor that caused bankers to continue taking risks. Agreements laid down apportioned the responsibility for guidelines and the monitoring of bonuses to the new powers of the Financial Stability Board.
