Emerging economies 'get new role'

BBC

The G20 group of leading and emerging economies will take on a new role as a permanent body co-ordinating the world economy, a US official has said.

The move will give more power to emerging economies, rather than to the developed powerhouses of the G8 group.

The Obamas welcomed world leaders to Pittsburgh

The G20 is meeting in the US city of Pittsburgh for a two-day summit.

Senior EU officials later announced a deal to shift the balance of voting in the International Monetary Fund to benefit growing economies like China.

Currently, China wields 3.7% of IMF votes compared to France's 4.9%, although the Chinese economy is now 50% larger than that of France.

Near the venue, police fired rubber bullets at protesters on a march. The previous G20 meeting, in London in April, was marred by clashes.

The disturbances are thought to have begun after hundreds of protesters tried to march, without permission, towards the convention centre where the summit is being held.

'Party over'

"The G20 is going to be the new body counsel that will be the coordinating body for international economic cooperation," said an unnamed US official, quoted by Reuters news agency, as the two-day meeting began on Thursday evening.

The plan is expected to be outlined in detail by President Obama on Friday.

With many major economies beginning to climb out of recession, attention at the G20 will turn to when and how to withdraw government stimulus packages.

Cracking down on bankers' bonuses has popular appeal with the public, it is expected that an agreement will be reached on how that might be achieved.

US Treasury Secretary Timothy Geithner said G20 countries had reached a consensus on the "basic outline" of a proposal to limit pay and bonuses by the end of 2009.

Each country would set their own standards, he said, but that these would be overseen by the G20's Financial Stability Board - made up of central bankers and regulators.

Earlier, UK Chancellor of the Exchequer Alistair Darling warned bankers that the "party was over" and they must realise that the world has changed.

Balance growth

A spokesman for the White House said that financial regulatory reform was the most important agenda item for summit, but that addressing global economic imbalances was also a priority.

President Obama has led a campaign to smooth out imbalances in the flow of global capital to try to secure greater long-term economic stability.

The US proposal calls on economies such as China, Brazil and India to boost domestic consumption in order to lower their trade surpluses.

Meanwhile the US and Europe would encourage more saving to reduce long-term budget deficits.

"The US can't, should not and won't continue to experience the consumption-led growth driving very high volumes of imports and lending impulse to the rest of the world economy," director of the US president's National Economic Council, Larry Summers, told the BBC.

"That's not a sustainable financial situation for the US and that's why we're in the process of adjusting."