The G20 meeting on 2 April, billed as the London Summit 2009 because of its inclusion of non-G20 players, captured positive media attention despite failing to set out a vision for transformative economic change, and pumping more money into the IMF and World Bank without a clear plan for reforming them.

Where did the 'trillion' go?

The IMF received most of the boost, with a possible $500 billion in new resources and $250 billion in issuances of Special Drawing Rights (SDRs). Of the $500 billion, only half has been signed and sealed, the vast majority of which had been previously announced: $100 billion from Japan in January and the same amount from the EU in March. Most of the new $50bn comes from China - a small drop in its vast ocean of reserves, indicating that it continues to be reluctant to back the International Financial Institutions (IFIs) financially without real governance reform. The second tranche of $250 billion only exists as a G20 promise to find the extra cash, and to make "substantial progress" in doing so by April's spring meetings.

The other massive increase in IMF resources was through an allocation of Special Drawing Rights (SDRs), the IMF's own internally created reserve asset. An SDR allocation effectively means printing new money, $100 billion of which will go to "emerging market and developing countries". Unlike other forms of finance, SDRs come without conditions attached, but a country must still pay interest when it uses them. As SDRs are allocated according to voting shares at the IMF, the majority will go to rich countries.

On new money for the multilateral deveopment banks (MDBs), the language is particularly hazy. The G20 agrees only to "support" additional annual lending by the MDBs of $100 billion per year. Some of this, such as a boost to IFC trade financing, is money already promised. Some is supposed to come from existing MDB resources. Some will come from a 200 per cent boost to the Asian Development Bank's capital, and consideration of similar moves for the Inter-American Development Bank and the African Development Bank.

World Bank attempts to garner additional contributions for their 'vulnerability' funds were snubbed, with the G20 making clear that these would only be delivered bilaterally from willing donors. So far, the UK is the only country to make concrete commitments - diverting £200 million of its existing aid budget for this purpose. The G20 also asked the Bank to increase lending limits for "large countries" and to lend at market rates to low income countries, but only those with "sustainable debt positions and sound policies."

Money for the poorest?


Big increases in IMF resources have not been matched with clear commitments to end the controversial austerity policies that have so far accompanied IMF bailout packages.


 •  IMF: The rich world's viceroy
 •  Market fundamentalism

Of the putative $1.1 trillion, $50 billion, or less than 5 per cent, is likely to be for the 49 poorest countries in the world. The communique does not give clear details of how this figure is arrived at. Brussels based NGO, Eurodad estimates that, in addition to $6 billion (over three years) from IMF gold sales that will be added to the IMF's concessional lending pot, $19 billion in new money will come from the SDR allocation. The communique also calls for a doubling of the IMF's concessional lending capacity, currently at about $20 billion. That means that most of the total is IMF loans, which are only available if poor countries' economies go into meltdown.

The detail on the promised "global effort to ensure the availability of at least $250 billion of trade finance over the next two years" is entirely absent from the communique. However, the IFC - the private sector lending arm of the World Bank - is already angling for a slice of this cash for its new global trade lliquidity programme. Most of the rest is likely to funds provided by export credit agencies, which have been heavily criticised for a host of issues, including focussing their support on the arms industry. The communique's commitment to meet existing aid pledges obviously meant more to some G20 countries than others. Italy, the current host of the G8, plans to cut its aid by 55 per cent this year.

Elephants in the room: governance and conditionality

The G20 communique says nothing new on IFI governance reform, and big increases in IMF resources have not been matched with clear commitments to end the controversial austerity policies that have so far accompanied IMF bailout packages.

Changes to voting shares to give developing economies "greater voice and representation" are promised in general but the annex appears to backtrack on IMF reform. The existing plan for Bank governance reforms by the 2010 Spring Meetings for the World Bank is reconfirmed, but on the Fund, the annex indicates that the slightly accelerated quota review may not address the democratic deficit or governance imbalance but will be undertaken "to ensure the IMF's finances are on a sustainable footing".

Critics remain concerned that lessons from the Asian financial crisis a decade ago have not been learned, where IMF conditions were blamed for worsening recessions. Duncan Green of Oxfam said: "We have deep concerns about how central the IMF has become in this crisis. The fund has been given a blank cheque but its reform remains no more than a promise."

Financial reform: does it have teeth?

Campaigning NGOs and continental European governments had pushed the issue of tax havens to the fore in the run up to the summit. The UK, itself a sponsor of many of the world's most famous tax havens including the Cayman Islands and Jersey, had picked up the rhetoric.

The G20 decided to endorse the OECD approach of exchanging information about companies and individuals suspected of evading taxes on request, rather than the more stringent automatic exchange of information called for by the Tax Justice Network and others. There was no mention of measures that could help developing countries crack down on corporate tax abuse: country-by-country financial reporting or requiring transparency of all information on beneficial ownership in all jurisdictions.

The fanfare surrounding a supposed 'blacklist' of non-cooperative countries published on the day of the summit by the OECD went silent when it emerged that only four countries were on the list - Uruguay, the Philippines, the Malaysian Federal Territory of Labuan, and Costa Rica - none of them well known tax havens. Further confusion followed when even these four were removed, leaving no countries in the OECD's worst category. The strong rhetoric - declaring that "the era of banking secrecy is over" and promising to "stand ready to deploy sanctions" - has yet to be turned into effective action.

As promised by the G20 finance ministers in March the Financial Stability Forum will be expanded to include all G20 countries, and renamed the Financial Stability Board (FSB). It will continue to have a purely advisory role to; "promote co-ordination"; "assess vulnerabilities affecting the financial system" and "set guidelines". With no specific powers or sanctions available to it, and a lack of a clear governance structure, it remains to be seen whether the new board will be an improvement on the old forum.

On banking regulation, a topic that has dominated headlines in the run up to the summit, surprisingly little concrete was agreed, though international bodies are tasked with looking further into a host of issues. International minimum capital requirements will remain unchanged "until recovery is assured" and the often criticised Basel II capital framework supported. The existing 'toxic assets' in banks remain a huge problem, but one that has been left to national regulators to fix.

The fund has been given a blank cheque but its reform remains no more than a promise.


 •  IMF: The rich world's viceroy
 •  Market fundamentalism

In his post-summit press conference, British Prime Minister Gordon Brown repeated his assertion that the 'shadow banking system' would be brought into "the global regulatory net", but the language of the communique is far more cautious - "systematically important financial institutions, markets, and instruments" should be subject to an "appropriate degree of regulation and oversight."

The FSB and IMF are tasked with deciding what "systematically important" means. Many hedge funds and private equity firms may continue to escape the regulatory net, especially those formally headquartered in off-shore financial centres. Hedge fund and credit rating agency "registration" is promised, and credit derivatives markets will be "standardised," but it is left to the industry itself to decide how to do this.

Missing the green picture

Green groups slammed the G20 for failing to grasp the opportunity to signal a clear commitment to building a low-carbon economy. The communique promises to "make best possible use" of stimulus packages "towards the goal of building a resilient, sustainable, and green recovery" and to "identify and work together on further measures to build sustainable economies." But there were no hard commitments about what portion of stimulus packages would be directed towards green projects, technologies, or jobs.

The aim of the upcoming UN climate talks in Copenhagen is set as reaching agreement, with no reference made to the scale of the changes G20 countries, particularly the richest ones, will have to make to combat climate change. Friends of the Earth said the G20 had "short changed people and the planet". Greenpeace said climate change had been tagged on to the communique as an "afterthought".

Liberalisation still the norm?

The communique is understandably short on the usual congratulatory opening paragraphs, though it reiterates support for "an open world economy based on market principles" but now balanced by "effective regulation, and strong global institutions."

On trade the expected promise to "not repeat the historic mistakes of protectionism" is made, but the commitment to "reach an ambitious and balanced conclusion to" the Doha trade round looks suspiciously similar to the commitments made by the G20 in Washington last November, since when little progress has been made. Interestingly the G20 estimate for how much the Doha trade round could boost the global economy stands at a modest $150 billion. Civil society organisations around the globe have questioned whether reviving a trade round that developing countries have rejected many times is a good idea.

Protest grows

Marches and protests took place around the world in the run up to the G20 summit, including in India, Philippines, Indonesia, Spain, Germany, France, Austria and Italy. In London, thousands marched under the banner of 'Jobs, Justice, Climate,' as part of the 160-plus Put People First alliance of development, environment, faith groups and trade unions.

In addition to mobilisation of citizens, civil society groups have also put out collective statements which look very different from the limited set of issues in the G20 communique. At January's World Social Forum, civil society and social movements from around the world produced a statement signed up to by more than 600 organisations worldwide, entitled "Let's put finance in its place!" It includes demands barely considered by the G20, yet at the heart of the debate about how best to control global finance, including managing capital flows, and calling for "citizen control of banks and financial institutions." It also issued a challenge to the leaders gathered in London, saying: "the G20 is not the legitimate forum to resolve this systemic crisis."

On the eve of the G20, at the World in Crisis NGO summit in Prague, a declaration was issued calling for putting economies "at the service of social, environmental and other vital interests of women, men, girls and boys, in particular to start greening our economies and to increase local economic resilience." A raft of proposals were included on a host of critical topics including: market regulation; breaking the dominance of finance over the economy; keeping the climate negotiations on track; rethinking development finance; fairly sharing resource consumption across the globe; ensuring tax justice; and making IFIs more transparent, representative and accountable.

Meanwhile, the London Summit was slammed for systematically excluding civil society voices. In contrast to most international gatherings there was no process for civil society organisations to accredit and attend. Of the few civil society representatives who were allowed in as media representatives, some had accreditation withdrawn at the last minute. One of these denied entrance, Benedict Southwark of UK campaigning group the World Development Movement said that this: "starts to reek of the deliberate exclusion of critical voices."

Spotlight turns to UN

A week before the G20 met in London, the UN General Assembly president's commission on financial reforms released its draft report. The Joseph Stiglitz-led commission was much stronger in the latest report than in its first set of recommendations, and appears ahead of the G20 curve. The G20 has yet to pay adequate attention to this high powered group of thinkers.

In contrast to most international gatherings there was no process for civil society organisations to accredit and attend. Of the few civil society representatives who were allowed in as media representatives, some had accreditation withdrawn at the last minute.


 •  IMF: The rich world's viceroy
 •  Market fundamentalism

The recommendations said: "short term measures to stabilize the current situation must ensure the protection of the world's poor, while long term measures to make another recurrence less likely must ensure sustainable financing to strengthen the policy response of developing countries."

The commission was not unwilling to lay blame: "Loose monetary policy, inadequate regulation and lax supervision interacted to create financial instability," and there was "inadequate appreciation of the limits of markets." The report split its recommendations up into things to be done immediately and those that should be on the agenda for systemic reform.

Among immediate goals, it called for global fiscal stimulus, a new credit facility with better governance arrangements than exist at institutions such as the IMF, an end to pro-cyclical conditionality and rolling back the limits on developing country policy space created by trade agreements. For the financial sector the commission noted "While greater transparency is important, much more is needed than improving the clarity of financial instruments," and recommended the use of rules and incentives to limit excess leverage, prevent tax evasion, and address the regulatory race to the bottom.

While the short-term recommendations were sometimes eye-catching, the systemic demands surprised many observers. The call for "a new global reserve system", echoed the demand to end the US dollar's privileged position as international reserve currency made by China's central bank governor Zhou Xiaochuan. The commission also supported the idea for a UN-based Global Economic Council at the head of state level - essentially bringing a G20 type structure under the auspices of the UN system.

On long-term changes to financial regulation, the commission listed seven areas for reform and warned against "merely cosmetic changes". Notably it said: "The fact that correlated behaviour of a large number of institutions, each of which is not systemically significant, can give rise to systemic vulnerability makes oversight of all institutions necessary." This throws cold water the G20's plans for regulating only 'systemically-important' financial institutions.

The UN commission, despite being organised more quickly than the G20 meeting, was much more open to civil society input. More than 100 organisations made submissions to the stakeholder consultation procedure, and the final report on civil society opinion was detailed, comprehensive, and well received by the commission. The civil society submissions were all put online, more than can be said of the official G20 working group reports (see Update 64), which are yet to be published. In late March, members of the commission also held interactive dialogues with representatives at the UN General Assembly and civil society organisations.

The global focus will now move to a UN conference from 1-3 June in New York, billed as the follow-up to the UN Financing for Development conference in Doha. The conference is being held at the initiative of the General Assembly president, rather than from the UN Secretariat because of opposition from some major countries. It is unclear how much participation there will be by heads of state, especially as the G20 announced that it will hold another leader's level summit sometime before the end of this year.