No redefinition of world capitalism

Washington: It was no Bretton Woods 2.

European leaders had great hopes for the emergency summit that they persuaded lame-duck President George W. Bush to host - with some comparing it to the 1944 wartime conference at Bretton Woods, New Hampshire, when 44 nations created the International Monetary Fund and the World Bank.

Even though French President Nicolas Sarkozy and British Prime Minister Gordon Brown hailed Saturday's meeting of global leaders as "historic", they didn't get what they wanted in terms of establishing a new brand of capitalism, dethroning the US dollar in a shakeup of the world's currency systems, or a quick-fix overhaul of the financial system.

Instead, leaders from the old economic powerhouses of Europe and North America and the fast-growing economies of Asia and South America agreed on the broad themes needing to be addressed to prevent the financial crisis from wrecking their economies - and to keep talking. The summit conclusions were big on strong-sounding intentions, but short on concrete plans. The world will have to wait until April to see how serious they are when leaders gather for a second summit, probably in London.

By then, finance ministers will deliver a catalogue of measures designed to rein in risky investing, including better regulation of financial markets, revised accounting rules, and an assessment of the compensation of bankers.

"What matters now are the follow-up actions," said World Bank President Robert Zoellick.

Crucial to the success of this meeting will be the attitude of President-elect Barack Obama, who wasn't even present in Washington. German Chancellor Angela Merkel said she's hopeful Obama will play ball. "I have not the slightest doubt that we will be able to proceed along the way that we set out today," she said.

"This is a reasonable approach that the new president will surely support." Despite the lack of substance - which financial markets will judge today - leaders claimed they still accomplished much by just gathering in such large numbers to grapple with the world's financial panic and pledging to work together to contain it.

In the past, a select few players - principally the world's top seven old-world industrial democracies: the United States, Japan, Britain, Germany, France, Italy and Canada - have talked among themselves. But the financial crisis has hit these economies hardest, and the engine of global growth next year will depend on the ability of countries such as China, India, Brazil to weather the storm.

The G20 includes the seven major industrialised nations, the European Union, and Argentina, Australia, Brazil, China, India, Indonesia, Mexico, Russia, Saudi Arabia, South Africa, South Korea and Turkey.

"The crisis has shown to leaders of the world the need to act together," said European Commission President Jose Manuel Barroso. Sarkozy claimed that the different economies of Europe - which were initially divided on their response to the crisis - showed "complete unity" and persuaded the US to break new ground.

"The US administration has accepted to move on subjects where historically all US administrations refused to move," he said. The leaders' agreement to consider oversight of rating agencies is, he said, something that "was never before accepted in the Anglo-Saxon world". And he hailed the decision to examine whether the compensation of bankers encourages risk-taking - saying "it wasn't simple" to get Britain and the US on board.

Merkel pronounced herself "extraordinarily satisfied" with the meeting.

She said that the document points to a willingness to implement comprehensive reforms in the regulation of the global economy. Brown said he won agreements he was seeking on closer coordination of fiscal policy, on pledges to make progress on reforming international financial bodies like the IMF and on making a concerted effort to strike a deal on the long-stalled Doha round of world trade talks.

But progress isn't likely to be made as quickly as he hoped, and pledges on cooperation over the use of government spending or tax cuts are loosely worded in the summit's communique.