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Will G20 find a cure for the global meltdown?

business Updated: Mar 27, 2009 22:26 IST
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From a slew of disastrous economic data to more anecdotal evidence of collapsing order books, cutbacks in lavish Indian weddings through to mass layoffs of miners in Africa as commodity demand slumps, all indications are that the global downturn is far from over.

The world's big economic powers meet in London next week, but there are few signs that major nations have laid aside differences on how to combat recession.

The Group of 20 meeting will mark US President Barack Obama's first major foray onto the world stage. Tensions have already emerged — notably between Washington and Europe — over the need for another round of fiscal stimulus packages to spur world growth.

European opposition to additional fiscal packages will make it hard for the summit to propose additional public spending to spur growth.

"They will find a global solution to the regulatory system, but I am more sceptical about agreement on further stimulus measures," said ING economist Carsten Brzeski.

This means London could prove to be the first major test of Obama's diplomatic skills. Obama has pushed for "aggressive" actions from other states.

Underscoring the sense of urgency facing the leaders is the risk that some national economies could lose the battle to stay afloat.

That danger has sparked one of the few points of agreement among G20 powers: More money for the IMF, which serves as an emergency lender for countries facing budget shortfalls.

Next week's summit will be only the second time that the G20 leaders, which together represent about 85 per cent of the world's economic activity, have met in the bloc's decade-long history.

The first summit in Washington in November came against the backdrop of a global financial shock triggered by a dramatic meltdown in the US mortgage market. As was the case in Washington, the April 2 gathering in London will also underscore the growing economic and political clout of the world's leading emerging economies and the consequent shift in the balance of economic power.

Yet the real threat is that without urgent action, the financial and economic crisis could transform into a jobs crisis as workers around the world are laid off.

DPA