The G20 meet comes after George Bush, the US president, defended free market principles in a speech in New York on Thursday and said further summits would be needed to overcome the crisis.
“Instead of just muddling through dealing with the crisis, we have to show how we are making the adjustments in the proper way to this global age”
Gordon Brown, UK prime minister
Bush said that while capitalism was “not perfect” and remained subject to excesses and abuse it was still “the most efficient way of structuring the economy”.
“The leaders attending this weekend’s meeting agree on a clear purpose: To address the current crisis, and to lay the foundation for reforms that will help prevent a similar crisis in the future,” he said.
Bush also outlined what the US saw as its top priorities in the meeting, including understanding the causes of the crisis, reviewing the effectiveness of responses, developing principles for reform, launching a specific plan and assuring the world that free-market principles were the only way to reach propsperity.
He also indicated that the International Monetary Fund (IMF) and World Bank needed to undergo reforms to give emerging economies a greater voice.
However, the US president said he remains adamantly opposed to a world regulating authority and major government intervention on the markets.
“History has shown that the greater threat to prosperity is not too little government involvement, it’s too much government involvement in the market,” he said.
On Friday Gordon Brown, the UK prime minister, also said that world leaders should resist protectionism, calling it “the road to ruin”, and said they should reject demands to protect jobs in sectors in decline, in indirect reference to the US’s ailing auto industry.
“Instead of just muddling through dealing with the crisis, we have to show how we are making the adjustments in the proper way to this global age,” he told the New York based Council on Foreign Relations.
|Merkel said all businesses and products
must be “properly regulated” [EPA]
Bush’s remarks contrasted with those of Angela Merkel, the German chancellor, who said on Thursday that the talks would be “difficult” and that more financial regulation must be imposed soon.
“We have to implement the first steps in the coming months. The target is that in the future all areas, all products and all businesses are properly regulated and supervised,” she told the Sueddeutsche Zeitung newspaper.
Al Jazeera’s Nick Spicer in Washington says it may be hard for the G20 to come up with a consensus when the US and Europe have opposing points of view regarding the crisis, not to mention countries such as Brazil and India.
“It is hard to come up with a consensus and with a lame duck president in office
who cannot sign off on a new world financial architecture for the American people when he is soon to leave office,” our correspondent says.
On Friday the European Commission also urged world leaders to prioritise the fight against world poverty during the summit.
“Poverty is the most urgent crisis facing the world,” Louis Michel, the EU Development Commissioner, said in a statement.
Its 19 member states, plus the EU, account for 85 per cent of the world economy and two-thirds of its population
Members include both developed and emerging nations that are considered to have strategic economic importance
“The ‘Bretton Woods II’ summit in Washington offers a crucial opportunity to integrate the development dimension into the new international financial architecture,” he said.
Bretton Woods is the name of the post-World War II economic settlement that saw the creation of the World Bank and the IMF.
Officals from the IMF and the World Bank are also to attend the weekend summit. However, Barack Obama, the US president-elect who is due to enter office on January 20, will not be attending.
On Friday US stocks opened down despite a large rally late on Thursday evening, with the Dow Jones Industrial Index falling at one point by more than 270 points, or three per cent, to 8,563.73.
The financial crisis began when the US real estate market collapsed as a result of the subprime mortgage crisis, spreading swiftly to the financial sector.
A cash crunch in the banking sector then caused the US credit market to seize up in mid-September, hurting businesses and sending stock markets spiralling downwards.