News Service from House Harris

UK: G20 to take 'whatever action necessary' on slowdown

HORSHAM, England, March 14 AFP - G20 finance ministers vowed on Saturday to take "whatever action is necessary" to curb the global slowdown, after talks preparing for a crunch summit next month.

Downplaying signs of division between Europe and the United States, they agreed that there was an "urgent need to increase IMF resources very substantially", although no figure was given.

"We're prepared to take whatever action is necessary to ensure growth is restored and we're committed to do that for however long it takes to do that," said British finance minister Alistair Darling, who hosted the talks.

The G20 will ensure there's "sufficient supervision and regulation" of hedge funds, he added. "In addition to that, we agreed that stronger regulation... was necessary to prevent the build-up of systemic risk.

"We also agreed that we need to do more both to strengthen banks in the good times so they can face the downturn should that occur", including measures that would see regulators stop banks from overextending themselves, he said.

Politicians from the United States, China and Japan plus wealthy European nations and emerging powers had held a day of talks to pave the way for the April 2 London G20 summit on tackling the downturn.

The run-up to Saturday's meeting was marked by splits between the United States and Europe, particularly on whether to launch a new economic stimulus plan or concentrate on tightening market regulation to fight recession.

But Darling said the finance ministers have agreed on a common line.

"Taken together, I believe that this does provide a very clear sense of direction as we move towards the conference of leaders and finance ministers to be held in London on April 2," he said.

"We agreed a significant amount of progress, there was a great deal of consensus both about the urgency of the problems we face and the steps that we ought to be taking."

He said the meeting also agreed to fight protectionism and protect free trade.

In a separate meeting on Saturday, British Prime Minister Gordon Brown, who will host the G20 summit, and German Chancellor Angela Merkel talked up the prospect of agreement at the much-vaunted London summit in about three weeks.

"I'm very positive, I'm very optimistic that we will be able to... come to an agreement together with the United States, with emerging economies such as China and India," said Merkel.

Brown added that key power-broker the US is ready to support changes in regulations for hedge funds and other "shadow banking" operations.

Highly speculative and lightly regulated hedge funds have been blamed for fuelling instability in financial markets.

The run-up to Saturday's meeting saw splits open up between the United States and Europe after Larry Summers, US President Barack Obama's top economic adviser, this week urged world leaders to take coordinated steps to pump money into the global economy.

That has been rejected by countries including France and Germany, which instead favour tougher regulation to tackle the crisis.

A US stimulus package of $US787 billion ($A1.2 trillion), signed into law last month, compares to 400 billion euros ($A789.11 billion) committed by 27 EU countries.

The two total economies are of comparable size, but the EU has not forged an integrated response.

The United States, eurozone, Japan and Britain are all in recession as the global economy struggles to recover from the worldwide credit crunch that erupted in late 2007.

Commercial banks are lending less cash amid fears about their exposure to the collapsed US subprime property market.

The agreement on the IMF came after the United States suggested this week that its lending capacity should be trebled to $US750 billion ($A1.15 trillion).

G20 emerging powers Brazil, Russia, India and China (BRIC) meanwhile said in a communique on Saturday that IMF resources are "clearly inadequate and should be very significantly increased".

It called for new, more flexible facilities to help countries facing financial problems, strengthened IMF surveillance and "urgent action" to ensure that emerging economies play a bigger role within the Fund.

The BRIC nations also warned against protectionism, describing it as "an increasingly real threat to the global economy".