G20 must guard, strengthen economic recovery: Obama

WASHINGTON (AFP) - Top world economies must step up crucial financial reforms in order to maintain the momentum of global economic recovery, US President Barack Obama told G20 leaders in a letter released Friday. We worked exceptionally hard to restore growth; we cannot falter or lose strength now, he said in a message to the leaders ahead of a June 26-27 summit in Toronto amid concerns over the pace of global economic recovery. Obama said the meeting would take place at a time of renewed challenge to the global economy, and laid out an action plan of issues he hopes the summit will tackle, including financial reforms. To support the recovery and strengthen the ability of our financial systems to deliver needed credit, we must maintain the momentum of financial repair. He offered a checklist of items that should be embraced, including stricter capital requirements and derivatives oversight, increased transparency and disclosure to promote market integrity and reduce market manipulation, and a mechanism for winding down global financial firms. We want our negotiators to reach agreement on a new capital framework we can endorse in Seoul that will include higher common equity requirements, tighter definitions of capital, a simple mandatory leverage ratio, and appropriate liquidity requirements, Obama said. Following Toronto, a G20 Summit will be held November 11-12 in the South Korean capital. In improving oversight of derivatives the complex financial instruments implicated in sparking the 2008 financial crisis Obama urged supervision and regulation, including conservative capital and margin requirements, disclosure and reporting requirements, and strong business conduct standards to mitigate the potential for systemic risk and market abuse. He called for a commitment to sustainable public finances, and warned that he was concerned by weak private sector demand and continued heavy reliance on exports by some nations within the Group of 20 emerging and developed nations. Our highest priority in Toronto must be to safeguard and strengthen the recovery, Obama stressed. As part of a global rebalancing program, China has been particularly urged to wean away from dependence on exports to boost domestic consumption while developed nations such as the United States have been told to keep their soaring deficits under control. The G20 sought and won the role as an international forum for coordinating the response to the global economic meltdown, and Obama reminded the organization of its responsibilities. Together we designated the G20 as the premier forum for international economic cooperation, he wrote in the letter dated June 16, but released by the White House early Friday. It is important that the G20 demonstrates its continued determination to work collectively to address the renewed challenges facing the global economy. The Toronto meeting follows months of crisis in the eurozone fueled by Greeces huge public debt woes and deficit, and concerns over the economic solvency of countries like Portugal and Spain, which have threatened growth across Europe. Obama said that resolving ongoing uncertainty about the transparency of bank balance sheets and the adequacy of bank capital, particularly in Europe, will help reduce financial market volatility and the cost of borrowing. Germany and France have both announced they want to tighten their belts, and Germany, Europes biggest economy, is working on a package of multi-billion-euro (dollar) spending cuts. The cuts have led to concerns that the recovery in the global economy after its worst slowdown in decades last year might be stopped in its tracks.

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