G20 promises welcomed by ECB's Trichet

JEAN-CLAUDE TRICHET, president of the European Central Bank (ECB), said yesterday the members of the G20 must tackle global economic imbalances in its new role as the key international policy forum, in the wake of the Pittsburgh summit. <br /><br />The group&rsquo;s new role, backed up by advice from the International Monetary Fund (IMF) and the Financial Stability Board, will allow for a combination of peer pressure and expert analysis, he said.<br /><br />Trichet added that central bankers appreciated G20 leaders&rsquo; commitment to fiscal responsibility, and their comments in Friday&rsquo;s Pittsburgh communique that a sense of normalcy should not lead to complacency.<br /><br />He added that a failure to wind down public stimulus programmes at the appropriate time would be a blow to confidence and impede recovery.<br /><br />The ECB boss also said that the recent improvement in financial markets was not surprising, given the actions taken by central banks and governments, and policy makers were keen to see how this would feed into the real economy.<br /><br />&ldquo;We monitor with great attention at this stage the interaction between the financial sphere and the real economy,&rdquo; he said.<br /><br />Trichet urged banks to boost their capital bases and said new banking rules proposed in the summit struck a good balance between taking a long-term view of capital needs and avoiding measures which would stop banks lending.<br /><br />Meanwhile in London, a survey of 465 City bankers by eFinancialCareers.com will today show a highly sceptical attitude towards the G20&rsquo;s ability to stabilise the banking system. <br /><br />Of those questioned, 88 per cent do not anticipate any significant impact on compensation levels within the industry as a result of what was decided at the G20.<br /><br />Only a handful of those questioned &ndash; six per cent &ndash; thought there would be any &ldquo;meaningful impact on compensation packages&rdquo; resulting from the G20&rsquo;s proposed remuneration packages.<br /><strong><br />G20: WHAT WAS ACHIEVED?<br />Decided<br /></strong>Leaders made a deal to shift the balance of voting in the International Monetary Fund (IMF) towards growing nations such as China, to reflect the changing balance of economic power.<br /><br />The group will work together to assess how domestic policies mesh, and to evaluate whether they are &ldquo;collectively consistent with more sustainable and balanced growth.&rdquo;<br /><br />G20 will replace G8 as the high table of global policy making, promising to give rising powers more say in rebuilding and guiding the world economy.<br /><br />Agreed to phase out $300bn worth of fossil fuel subsidies.<br /><strong><br />Not decided</strong><br />Frustration in Europe that little was agreed on how to pay for fighting climate change.<br /><br />No specific rules on the capital reserves that banks need to hold.<br /><br />No agreement on a cap on bonuses for high earners. Leaders instead agreed that bonus payments should not be guaranteed for many years, should be deferred in part, and should not exceed a percentage of the bank&rsquo;s revenue.<br /><br />Confidence that they had succeeded in tackling the financial crisis dismissed as hubris by some commentators, who saw Obama&rsquo;s two-word declarative sentence, "it worked", as risky.