G20 must strengthen economic recovery: Obama

WASHINGTON, June 19, 2010: US President Barack Obama has urged the world's leading economies to boost reforms aimed at maintaining the global recovery, ahead of two key summits next week.

"We worked exceptionally hard to restore growth; we cannot falter or lose strength now," Obama said in a letter to G20 leaders ahead of a June 26-27 summit in Toronto.

"Our highest priority in Toronto must be to safeguard and strengthen the recovery," Obama stressed in the letter dated June 16, but released Friday amid concerns about the pace of global recovery.

The summit follows a meeting of G8 leaders on June 25 and comes after months of worry about the health of the eurozone, fueled by Greece's huge public debt and concerns over the solvency of countries like Portugal and Spain.

Obama said that "resolving ongoing uncertainty about the transparency of bank balance sheets and the adequacy of bank capital, particularly in Europe, will help reduce financial market volatility and the cost of borrowing."

Germany and France have both announced they want to tighten their belts.

Germany, Europe's biggest economy, is working on a package of multi-billion-euro (dollar) spending cuts, which have led to concerns that the global recovery -- from the worst slowdown in decades -- might be stopped in its tracks.

Obama said the meeting of the Group of 20 developed and emerging leaders would take place "at a time of renewed challenge to the global economy" as he laid out an action plan of issues he hoped the summit would tackle, including financial reforms.

"To support the recovery and strengthen the ability of our financial systems to deliver needed credit, we must maintain the momentum of financial repair."

He offered a checklist of items that should be embraced, including stricter capital requirements and derivatives oversight, increased transparency and disclosure and a mechanism for winding down global financial firms.

"We want our negotiators to reach agreement on a new capital framework we can endorse in Seoul that will include higher common equity requirements, tighter definitions of capital, a simple mandatory leverage ratio, and appropriate liquidity requirements," Obama said.

He also called for a commitment to "sustainable" public finances, and warned that he was "concerned by weak private sector demand and continued heavy reliance on exports" by some nations within the G20.

As part of a global rebalancing program, China has been urged to wean itself away from dependence on exports to boost domestic consumption.

Developed nations such as the United States have been told to keep their soaring deficits under control.

In apparent message to China over its allegedly undervalued currency, Obama said he wanted "to underscore that market-oriented exchange rates are essential to global economic vitality."

The G20 sought and won the role as an international forum for coordinating the response to the global economic meltdown, and Obama reminded the organization of its responsibilities.

"Together we designated the G20 as the premier forum for international economic cooperation," he wrote.

"It is important that the G20 demonstrates its continued determination to work collectively to address the renewed challenges facing the global economy." AFP