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On November 15, the Group of 20, representing the world's largest
On November 15, the Group of 20, representing the world's largest economies, will meet in Washington to discuss ways to overcome the global financial crisis, the worst since the 1930s.

The G20 includes the G7 and the BRIC (Brazil, Russia, India and China) countries, plus other significant economies such as Australia, Indonesia and Turkey.

The leading emerging economies said at the 10th meeting of the G20 finance ministers and central bank governors in Sao Paulo, Brazil, on November 8-9, held to prepare proposals for the Washington meeting, that the financial system must be restructured to take into account their combined economic strength, which is expected to surpass that of the world's richest nations in coming decades.

G8 no longer sufficient

Initially, the global powers planned to convene an emergency G8 summit to discuss cures for the ailing global economy. But it soon became clear that such a meeting would not be of much use without the BRIC countries.

The best option is the Group of 20, founded in 1999 as an informal arena to facilitate dialogue between major industrial and emerging economies. The G20 accounts for 85% of the world's economy and about two-thirds of the world's population.

The emerging countries said in Sao Paolo that the system put in place by the 1944 Bretton Woods agreement, with the IMF and the World Bank as its core institutions, was outdated and needed to be changed to take into account the greater economic importance of emerging nations.

They said they were ready to take urgent measures to stimulate economic growth. Following in the footsteps of the advanced countries, the emerging economies pledged to slash interest rates and increase state investment in the economy.

China, whose development pace is the fastest among the emerging economies, has announced a crisis management plan worth about 20% of its GDP.

Russia has promised to spend 15% of its GDP on assistance to the financial sector and the industry. On November 7, the Russian government presented a plan specifying the allocation of 5.4 trillion rubles ($197.5 billion) for the purpose.

The emerging countries' leaders agreed in Brazil to coordinate their actions to stimulate the development of trade and capital flow between them.

Russian Finance Minister Alexei Kudrin said the G20 might eventually replace the G8. Initially designed as a meeting of the G20 finance ministers, the group will now also hold meetings for the national leaders.

In Kudrin's opinion, the G20 will snatch the initiative from the G8 in drafting global solutions.

Brazil expressed a similar opinion.

Only the BRIC countries and other emerging economies will be able to ensure global economic growth next year. According to a revised IMF forecast, almost all the advanced economies will contract next year, including the U.S. (0.7%), Japan (0.2%) the eurozone (0.5%) and Britain (1.3%).

In short, the financial crisis may become the first recession to simultaneously hit all the advanced economies since WWII.

The idea of turning the G20 into the leading financial, economic and political organization will have its opponents, above all the Group of Seven richest countries (the U.S., France, Germany, Italy, Japan, the U.K., and Canada). World Bank President Robert Zoellick, an American, said it would be better to continue meeting in the G7 format, with the largest emerging economies invited for unofficial consultations.

A revolutionary from the U.S.

But Zoellick's idea will hardly materialize in conditions of the current financial crisis and recession, which has spread from the U.S. to the other advanced countries. Besides, a Democratic Party team led by President-elect Barack Obama will soon replace the Republican administration, blamed for plunging the country into the crisis.

Obama said at his first press conference as president-elect on November 7, "A fiscal stimulus plan that will jump-start economic growth is long overdue," adding, "the financial crisis is increasingly global and requires a global response."

He hinted that he was not satisfied with the stimulus package proposed by President George W. Bush, and said that if the package "does not get done in the lame-duck session, it will be the first thing I get done as president of the United States."

Obama's economic staff is working on a more embracing package, which aims at using the financial crisis to restructure the U.S. economy. Its key priorities are clean energy, health care, education and tax relief for middle-class families, as well as "additional policy options to help the auto industry adjust, weather the financial crisis, and succeed in producing fuel-efficient cars here, in the United States of America."

However, the main goal of upcoming changes in the U.S. economy is to support middle-class families, which is just what the Russian government is trying to do.

The opinions expressed in this article are the author's and do not necessarily represent those of RIA Novosti.


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