G20 nations issue pledge to avoid protectionism

THE chancellor said last night that the “grave” global economic situation would not turn into a repeat of the Great Depression of the 1930s because of the actions being taken by governments to boost their economies and avoid a damaging trade war.

Alistair Darling, after chairing a meeting of the G20 finance ministers and central bankers in West Sussex, contrasted the readiness of countries to act now with their failure to do so during the 1930s.

The G20, which comprises the western industrial countries plus big emerging economies such as China, India, Brazil and Russia, issued a strong commitment against protectionism, saying they would fight all forms of it and maintain open markets.

They also signalled a clampdown on hedge funds, risky financial instruments and tax havens. Tim Geithner, America's Treasury secretary, said reform was vital so “we never face a crisis like this again”.

The finance ministers of the G20 countries, who between them account for 85% of the world economy, also pledged that they would take sustained action to end the global recession.

The meeting, which was intended to set the scene for the April 2 gathering of global leaders in London, papered over any differences of opinion.

“Decisive, co-ordinated and comprehensive action” had been taken to boost growth and cut unemployment, they said, and further action would be taken if necessary.

This could give Darling cover to announce a giveaway in his April 22 budget, but Treasury officials said no decisions had been taken on whether the pledge of action would result in further measures.

The chancellor, who had announced tax cuts and spending increases worth £20 billion in his November pre-budget report, has been playing down the prospect of additional action, although he has hinted at measures to help savers.

Darling said he welcomed the G20's commitment to take “whatever action is necessary” to end the global recession and added that it was vital to boost confidence as well as supporting the banking system.

He was backed up by Geithner who said the decisions taken yesterday would help to bring the recession to an end sooner.

As well as agreeing action to boost growth, the finance ministers and central bankers set out a framework for dealing with bank rescues and for future regulation. Hedge funds will be more closely regulated, as will the sophisticated derivatives' markets that had provoked the global financial crisis.

Last week Europe’s tax havens, including Liechtenstein, Luxembourg, Jersey and Switzerland, entered into information sharing agreements.

The communiqué glossed over underlying divisions between the countries over whether further public spending would help the recovery. While Britain and the United States have led calls for more fiscal stimulus measures, Germany and France have been more cautious.