A transcript of a briefing on the G20 for foreign media given by the Prime Minister on 23 March 2009.
Read the transcript:Prime Minister:
Good Evening. I have got a very good excuse for being late, but I do apologise. I have just been talking to President Obama about the G20, so I hope you will understand.
Before I take any questions I just want to put the G20 into context: this is the world coming together to address global problems that need global solutions. We know that the problems thrown up by the vast global changes that have taken place over the last decade or two include the need for financial stability, the need to act on climate change and to deal with our energy problems, the need to ensure that there is security in a world of mobility, in a world where there is terrorism, and of course the need to act against the poverty and inequality that disfigures so much of the world.
Resolving these problems could ensure that the global economy and our global society works well in the future. I am very conscious that over the next 20 years we need to envisage a world where people who are today just the producers of their goods, become the consumers of our goods as more and more middle income jobs and lifestyles are created around the world. So we have got to solve problems with the global economy before we can move to the next stage, but by solving these problems we could make sure that the world enjoyed a greater and more sustainable prosperity in the future.
The purpose of the G20 is to bring people together to agree common policies - coordinated policies - that can deal with problems; particularly financial instability, the lack of growth, the loss of trade and the loss of jobs that is hurting every continent.
It is true that 2008 was the year when the financial crisis was global, and seen to be global. I think 2009 will be the year when we have shown that as a global community we can work together to solve the problems.
First of all we have got to deal with restructuring our banking and financial systems, and I believe that we will show that the world can come together to agree common rules for the future. We have got to deal with the problems of offshore tax havens. We have got to deal with the cross-border supervision that is necessary in a global economy. We have got to deal with the help that has got to be provided for countries that cannot restructure their banking systems on their own but need help from international institutions, and we have got to deal with the problem of remuneration being out of kilter in many places that need sustainable growth.
Second, we have got to ensure that the world economy can grow over time, so we will look at the different measures that individual countries have taken or are taking, and discuss the next stage. Obviously we want a return to higher levels of trade, so we will want to do something that can help facilitate trade between countries where at the moment trade credits are not available and trade is slowing.
Thirdly, we will want to help the poorest countries and help emerging market countries that have got their own problems, and we are concerned about the rise of poverty in a number of countries and what we can do about that.
And fourthly, we will want to restructure our international institutions for the future. So institutions like the IMF and the World Bank that were built for the 1940s, have got to be adapted to the new needs of 2009.
I will be speaking about some of these things in the European Parliament tomorrow, then I am going to New York to talk to people there, and then I am completing the process of discussing the work of the G20 with every continent by visiting Latin America during the course of the later part of this week.
We are determined to consult as widely as possible. We had a seminar meeting with African leaders only a few days ago. I have met all of the European Union members of the Council a few days ago. We have had extensive talks with Premier Wen of China, I have been talking to Prime Minister Singh of India, we are in touch with Japan and with all the members from the Asian countries and I think it is very important that I am in a position also to hear what is said by the Latin American countries that are coming to the summit.
So this is a test of the world’s ability to work together and it is a test I believe we can pass, but it is a challenge because we are in the most challenging of financial circumstances.
I am very happy to answer any questions.
Question:
Prime Minister you have called for a global new deal, a new Bretton Woods… but, beside a possible deal on IMF, a new global stimulus seems more and more unlikely and more unlikely to see some actual decision on a new regulatory system… Do you still expect a global new deal, do you still see something big happening?
Prime Minister:
Well we are involved in a long process. We had a meeting of the G20 in November, we have got a meeting in April, but this will be part of a process. We have got Copenhagen in December to look at environmental issues and the need for a recovery to be low carbon, an issue which I hope we will touch on at our meeting in April. And I wouldn’t be as pessimistic as you about the ability of the world to come together. I think people recognise the need for coordinated action, I think people understand that we have got global problems now that require global solutions. I think you will see an agreement on measures that will help rebuild our banking and financial system, I think you will see agreement on measures that will stimulate trade and growth, and I wouldn’t be as pessimistic as your question suggests about what we can achieve.
Question:
Prime Minister I want to ask you about the reform of the IMF and the World Bank. There has been much talk about [indistinct] for the 21st century. Could you give us something concrete, specifically emerging economies and countries that will give more to these international institutions in terms of finance? How much say will they have at the decision making table?
Prime Minister:
Right. Well first of all, look at the conclusions of the European Summit and look at the conclusions of the G20 Finance Ministers meeting. Both say they will take what action is necessary. So I think you will find that people are pretty clear that we have all got responsibilities, whether it is in the monetary field or elsewhere.
On the International Monetary Fund, we are in a changing world so obviously our international institutions have got to reflect the changes that are taking place in the world. And it is hardly surprising that the systems that were built for decision making in 1945 are going to change over the course of the next period of time. And I think there is a general agreement that we need greater representation from those countries that have grown over the last few years, and there has got to be recognition of what has been happening to the global economy.
I also believe that you will find that countries are willing to finance our international institutions, to do more, and what I mean by doing more is helping with a crisis facility, helping countries restructure their banking systems, helping achieve greater growth in the world economy, helping facilitate trade. And I think there is a common interest on that being done.
Question:
Prime Minister as a Chancellor during ten years you have been praising the regime in the City, the light touch regime regulation. Now you are asking for the opposite thing as President of the G20, in my opinion. So how can you explain that you are going in the other direction now and were you wrong at that time, are you wrong now? How can you explain that?
Prime Minister:
I have just got to say to you, look back and see from the Asian crisis onwards that we, Britain, were trying to propose and get agreed international systems of cooperation to deal with what we saw as global financial issues. So we proposed a Financial Stability Forum, we proposed reform of the International Monetary Fund and the World Bank, we proposed cross-border supervision, all the things that are going to be seen to be necessary we have been active in proposing over the last ten years.
As far as the City is concerned, we have learnt a great deal from what has happened over the last period of time and we believe that what we tried to create was a risk-based regulatory system, so where a company was a risk it was [indistinct] regulation, where a company was doing well and was showing itself to be effective then you didn’t need regulatory input. But what we have learned in this crisis is that banks can seize up all across the world, so the effect of what is happening in one bank is felt by another bank, it is felt by another bank. Banks are entangled with each other in such a way that when something happens to one bank it affects lots of banks. And that has got to be built in now into our regulatory and supervisory system of the future.
Question:
Prime Minister would you be in favour to see more power of supervision granted to the European Central Bank?
Prime Minister:
Well the de Larosiere report has done a great deal of work on this, as has our Turner Report which was published in London just a few days ago. What Larosiere recommends is that in this single financial market we have got to have agreed rules and that we have got to look at what these rules are for the future, and we agree with that. As far as the individual supervision of banks are concerned, that has always been a matter for the national supervisory authorities and I believe it will remain that way.
Question:
There are issues which will be addressed at the G20 summit, but the market has high expectations in the financial global market about the G20 outcome. What do you think will by the minimum requirement for the G20 countries to accomplish? [indistinct]
Prime Minister:
The important thing is that we are able to come together and make coordinated decisions about the future of our financial systems and about how we can secure growth in the world economy, that we show that we are going to reform and modernise our international institutions for future and present needs and update them for the changing global economy in which we live. And I think we will be able to show that the power of cooperation together is such that we can look forward with confidence to Copenhagen and an environmental summit that is successful, you can look forward to action through the United Nations and other organisations that will secure progress on the Millennium Development Goals, and that you can have greater agreements also between countries on security.
I think we will prove the value of countries working together. The G20 has countries representing more than 80% of the world’s income and we have reached out to all the other countries who are not coming to the G20 but have a part to play in putting their views; I think people will see international cooperation at work.
Question:
I am just wondering with this talk about renewed focus on regulation and financial institutions, what role Canada might have to play given that the banking system there has proved remarkably resilient to the global fluctuation?
Prime Minister:
Yes, well I have talked to your Prime Minister, Stephen Harper, over the last few days about the progress we are making towards the G20. I think the issue for all of us, whether we have had banks that have been in difficulty or not, is the cross-border nature of global trade and global financial services. We have got to satisfy ourselves that the cross-border supervision that people are looking for is satisfactory to underpin a world where you have global flows of capital. The world has changed fundamentally over the last 20 years. We used to talk about national flows of capital, now we talk about global flows of capital; we used to talk about domestic competition, now we talk about global competition, and in the way that the world has changed we have got to respond, and so we have got to have cross-border supervisory arrangements that are satisfactory to all countries.
And we have seen also how a bad bank somewhere can affect good banks anywhere. The nature of cross-border supervision provides protection against this contagious impact seen in many countries where one bad bank which has been entangled with other banks has affected the whole banking system.
Question:
Prime Minister, so far we have heard a lot of people talking about anti-protectionism, but we have seen little done. What is your opinion on this?
Prime Minister:
Well I think we have got a duty to say that protectionism protects no-one effectively in the long run, that protectionism can become the road to ruin because world trade declines, companies then receive less orders, jobs then go in these companies and you have a cycle of decline when you are not in a position to trade successfully with each other. So I think what we will be anxious to do at the G20 is to ensure that we have a proper monitoring mechanism so that we can deal with problems where there is protectionism and when they arise. I think we will also want to ensure that we can expand trade around the world. It is very difficult for people to get credit, you know export credit, trade credit at the moment and we have got to do something about that as well.
Question:
The German Chancellor always has been keen on making the point of financial sustainability and there has even been this idea of creating a kind of charter of financial sustainability. Can you say what format this will take? Will it be part of the end document of the G20 summit in London, will it be a line in the paper or will it be a kind of agreement with the participants?
Prime Minister:
Well, can I applaud Chancellor Merkel for her proposal for an international charter. I think she is talking about a charter that is about economic sustainability, not just financial sustainability, and I think there will be a lot of support for that proposal. In other words, the world looks at what are the principles that govern economic life in the future and how we can advance them, and at the same time all of us are concerned to make sure that there is fiscal sustainability.
We have got a problem; when markets falter and banks fail, then it falls to government, as the representative of the people, to take the action that is necessary to move the economy forward. But we must do so in a situation where we are clear about the sustainability of our actions over the medium term. So it is right for us to take action to give a stimulus to the economy, but it is also right that we make sure that we show the public how we achieve sustainability over the medium term.
Question:
My first question Prime Minister would be, everybody talks a lot about coordination, but we see these countries taking their own positions, regardless of the others. Today the US has announced a huge package which was not coordinated, it is one week before the G20 summit, and other countries have done the same. So my question would be; is this really going to be coordinated, because it doesn’t look like it is now. And just because you are going to Brazil in two or three days time, what do you hope to achieve in your visit to Brazil, which specific things do you intend to take up with President Lula?
Prime Minister:
Well I am looking forward to meeting President Lula again. He has been a very good friend of our country and I am looking forward to visiting Brazil. We will be talking about climate change and the environment, as well as about the economy, and his leadership on that has been very important. We will also obviously be talking about how we can see the economy moving forward.
I think there has been far more coordination than you are giving the world credit for, and I think there will be more in the future. Each of these bank restructuring measures has been founded on common principles and while each country will take the action that is most appropriate to the type of banking system they have, the number of banks they have, America has got hundreds of banks, we have got a very small number of big banks in Britain, each country will take appropriate action. And there are common principles that will underline what we are doing. We are trying to isolate the bad assets, we are trying to underpin the banking system so that it can succeed in the future, and we are trying to resume lending to get the banks to do what they are supposed to do, and that is to provide credit and lending to businesses as well as to families. So I think you will find there is more coordination than your question suggests.
Question:
[indistinct] remuneration of bankers, and secondly, what happens if the G20 fails to reach an agreement on anything? So what kind of doom scenario would you [indistinct] if there is no agreement on a stimulus etc?
Prime Minister:
I think people want to see an agreement on the principles that govern remuneration for the future and I think the main thing people want to see is whether you can find a means where people are taking risky action and really constructing short term deals, that you can see these risks taken more fully into account in the way that remuneration is done. And I think what people really want to know is that people are rewarded for hard work and for effort and for enterprise and for responsible actions, but are not rewarded for irresponsibilities and for excess.
And I believe, in answer to your second question, that the G20 will move things forward and I don’t believe that we are looking at a scenario that you paint.
Question:
[Indistinct] the nature of the modernisation of the international organisations, is it just going to be cosmetic changes or are there going to be changes about the way that the organisations work, and is there a different (indistinct) for the conditionality of the loans?
Prime Minister:
The International Monetary Fund was set up in the 1940s to deal with what were effectively national balance of payments problems in individual countries. But we have now got a global economy where each country is affected by the actions of the others, and so you have got to have a different kind of international organisation to deal with these problems. You have got to have some means of bringing together the coordination of supervision in the world economy, you have got to have some means of dealing with the surveillance of early warning for crises, and as far as the World Bank is concerned, you have got to find an organisation that can deal with environmental as well as development issues. So the changes that I am suggesting would point to a very different kind of Bretton Woods organisation. It would point to the International Monetary Fund being more active in its surveillance of the world economy, providing early warnings for people, making sure that we are in a position to answer the question of how we can ensure growth and trade growth in the world economy. The World Bank would also be a position to do more on development and to do more on the environment.
Question:
How would you describe the contribution of Russia in the G20 agenda, and it is not a secret that Moscow sees the current relations with London at a very low point. And do you think that the G20 could be used to make some efforts to improve these relations?
Prime Minister:
Well I am looking forward very much to welcoming President Medvedev to London. I talked to him on the phone very recently about the summit itself. He has put forward his proposals, we are talking about common actions that we can take together and I would just say to you that we want a good and strong relationship with Russia and that is what we are aiming to achieve.
Question:
You mentioned in your opening remarks the lack of credit for trade and that is precisely [indistinct] main issue that Brazil is wishing to discuss with you on your visit to Brazil. But he is expecting it seems a complete proposal of the Presidency of the G20 - yourself - to solve this problem of credit for trade, chiefly for emerging and developing countries. Is Britain [indistinct] proposing something concrete?
Prime Minister:
On trade facilities?
Question:
On credit for trade.
Prime Minister:
I think we are making progress on that. Obviously I would want to talk to President Lula first before I made any specific proposal, but I believe everybody now sees that world trade is declining, that one of the reasons it is declining is that people do not have the credit to make the trading deals succeed and therefore we have got to do something about the provision of export credits and trade facilities. So I agree with you, this is an issue and I think that the London Summit will come up with proposals on this.
Question:
You indicated recently to the African leaders that there would be continued financial support to developing countries, including Africa, despite the economic crisis. I wanted to know whether these [indistinct] from the African countries with regard to performance in terms of fighting corruption or good governance, etc? And also secondly, would you support a proposal by South Africa that Zimbabwe [indistinct] written off?
Prime Minister:
I think first of all that we are determined to not only involve African countries in the work of the G20, but to show that this is not the time for us to cut back on our development agenda. It is important that the solutions, whether it is to climate change or to financial instability involve the actions that are taken in every continent. And of course we are determined to continue on the road towards the Millennium Development Goals. Indeed I was talking to President Obama about this very issue only a few minutes ago. We have a responsibility to those people who have been pushed into poverty as a result of this financial crisis and we will do what we can to be of help.
And as far as Zimbabwe is concerned, we are providing humanitarian aid. The cholera epidemic is a problem that hurts thousands of people in Zimbabwe and causes a lot of lives to be lost. We want there to be sufficient humanitarian aid directed to the people, and obviously we are looking at how the new government is able to address these problems, but we want obviously an end to the corruption. We want to be absolutely sure that there is a path towards democratic elections in the future and we want to be sure that political prisoners are released. Now these are some of the things that are important to us as we deal with the problems in Zimbabwe, as for the whole of Africa. Obviously we want transparent and open political and economic systems and obviously the aid and support that we give is to encourage that.
Question:
If everybody is agreed that China and India, the fast developing countries, should get more say in the IMF, is anybody prepared to actually give up a say in the IMF to give them more votes, more quota? I mean Europe at the moment is over-represented, one would think. I mean have you actually managed to persuade some of your colleagues to actually give up some of their quotas?
Prime Minister:
Well as you know there has been a long discussion on this over the years, there were some changes made about a year and a half ago in the IMF quotas. We continue to look at what can be done. But you know it is pretty clear that the global economy has got to reflect, the global economy’s institutions have got to reflect what is happening in the global economy.
Question:
Could give us a broader idea of what the conversation with President Obama was about, and perhaps use it as an occasion to answer another question, which was suggested by some of the remarks by the President of France and others in recent days, are we hearing the death knell of Anglo-Saxon capitalism?
Prime Minister:
We are actually at a time of great change in the global economy, we are on the way to creating probably for the first time a truly global society. And I think when people look back on the last two decades they will see this massive growth that has taken place, 4 billion people are part of this industrial economy. And the way that we run the global economy, how we deal with what we know are global and common problems of financial stability, climate change and poverty and inequality which happen around the world, is an issue that has got to be addressed. And so I don’t think we are talking about anything other than the creation of a truly global society where you have institutions that can reflect what we have to do in common as national economies and national societies. And that is really what has changed over the last 20 years, the global sourcing of goods, the global flows of capital, the global competition. And once you have that then you have got to have some means by which the world can come together to address the problems that arise from this.
So to talk about the issues, and a rather static one, between the 19th century this and 20th century that - all these terms that we used then - is in my view to miss the main point, and the main point is with all of us there is the Anglo-Saxon world, or the European world, or the Asian world, we are having to deal with new problems, new problems that were not conceivable 50 years ago, or even 25 years ago, but new problems that have got to be dealt with by globally us coming together and where there are global problems we have got to find global solutions. So I think that is the real issue.
And as far as my talks with President Obama, we were talking about how we work together towards the G20 summit, but we were also talking about the other issues - Iran, Afghanistan and many of the issues that we have got to deal with in America and Europe together.
Question:
Can we expect an immediate benefit from this London summit for countries like Turkey in the process of negotiation with the IMF?
Prime Minister:
I think the question for the IMF is whether it is fully funded to deal with the issues that are coming before it. We want to make sure that if there is a crisis facility available, or a preventative facility, then there are sufficient funds that the world community is prepared to come together to make available. I mean if you think about the global economy and its size, more than $60 trillion, then to deal with problems that exist in different parts of the world you need to have your international institutions properly funded, and that is one of the things that we are looking at.
Question:
I wanted to ask about the protests that are being planned during the summit. Aren’t you concerned that they will [indistinct] the summit agenda, because maybe this time the protestors might have more legitimate terms and support than there was during the summit five years before.
Prime Minister:
I think people will recognise that the world is trying to come together to deal with real problems. I think the greater protest would be if the world didn’t come together and act together to deal with these problems and I think we have got to take a long term view about this. As we create this global society over these next few years the world will have to be better coordinated in the way it acts, and I think even if people protest about individual issues that are related to the summit’s agenda, I think most people will want to see coordinated action at an international level.
Question:
(Indistinct) your talks with Dr Singh. India of course because of the recent security fears, particularly after the Lahore incident, did the terrorism issue figure in your talks? Number two, about the banks [indistinct] better than the banks in the western countries. Are there any lessons to be learnt from all the [indistinct] standards prevailing in the developed countries?
Prime Minister:
Well first of all I had a very good conversation with Prime Minister Singh. I wanted to ensure, myself that he had our best wishes that he has recovered from his heart by-pass operation and he seems to be in very good health now and it was very good to be able to talk to him. He is a very old friend of mine and I enjoy our conversations. We did talk about terrorism and about the problem that India has faced as a result of the Mumbai bombings. We have offered whatever help we can to track down those who are responsible and we will help the Indian government in their efforts to combat terrorism. So we will continue to work together with India on these issues.
As far as the banking system is concerned, there are certain principles of banking - sound banking practice, integrity, taking responsibility, not taking excessive risks and being responsible - these are very important principles of banking and these are the principles that we have got to find a way of agreeing to as being necessary in every part of the world.
I just want to conclude by thanking you, saying that I hope you will see that what we are trying to do is to deliver an outcome from the G20 which shows that the world can work together to deal with common problems, and we will keep you up to date with how we are moving towards our conclusions. But we look forward to welcoming every individual leader from every country you represent to London, and hope that you will find that you have got the access to the G20 that you need.
So thank you all very much.
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