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London summit in spotlight amid hopes for finding solutions to economic dilemma
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11:05, March 31, 2009

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The G20 meeting in London has been increasingly in the spotlight amid hopes for finding solutions to the current world economic crisis.

Leaders of the G20, which includes both developed and developing countries, will meet to discuss how to fix the world economy at the meeting on April 2.

The G20, which represents nearly 90 percent of the global GDP, 80 percent of world trade, and two-thirds of the world's population, is racing to the front line in the fight against the global crisis as the Group of Seven (G7), the traditional team of big players, retreats due to its declining power in the global economy.

"The G7 takes a 'back seat' as the crisis pushes G20 to the fore," was a Bloomberg headline in a February story prior to G7's finance ministers and central bank heads convening in Rome.

While the G7 has realized it is unable to shore up the world economy on its own, it is definitely not an easy task for the G20 either. But it is a job that must be done and confidence restored.

Over the past a year or two, the world economy has been in a downward spiral, coupled with financial turmoil. The International Monetary Fund (IMF) has revised downward its forecast for the world economy on a number of occasions, and the latest one was alarming: the world economy for 2009 is projected to shrink for the first time in 60 years.

Though the IMF said in its March 19 report that global growth is forecast to stage a modest recovery next year, the projection is conditional subject a list of factors.

"Turning around global growth will depend critically on more concerted policy actions to stabilize financial conditions as well as sustained policy support to bolster demand," the IMF said.

Prior to the London summit, there is wide consensus that concerted efforts are needed to pull the world economy out of the current slump since no country is immune to the crisis.

According to the IMF, advanced economies will suffer deep recessions in 2009, and there will be spillovers affecting other economies.

"In emerging and developing economies, as well as in low-income countries, growth will continue to be impeded by financing constraints, lower commodity prices, weak external demand, and associated spillovers to domestic demand," the IMF said in its report.

"Activity is expected to expand only weakly in 2009 before recovering gradually in 2010. Some economies will suffer serious setbacks," it said.

Calls for international cooperation have intensified as the world is on the same economic boat of downturn.

"The world can work together," British Prime Minister Gordon Brown said on March 23.

He said the outcome of the recent meeting of the 27 member states of the European Union had shown that leaders were determined to "reshape the global financial and trading system" and do what was necessary to build economic recovery across the world.

According to the official website of the London summit, the objective of the conference is to bring the world's biggest economies together to help restore global economic growth through enhanced international coordination. It has laid out three required commitments by world leaders to achieve this goal.

The commitments include actions to stabilize financial markets, to reform and strengthen global financial and economic systems, to put the global economy on track for sustainable growth, high levels of employment, and poverty reduction.

The issue of protectionism is also expected to be addressed.

"Economic isolationism can lead to a negative spiral of events such as those we saw in the 1930s, which made a bad situation much, much worse," World Bank president Robert B. Zoellick said in the report,

Trade and investment, the core engines for driving growth whichhave led the world towards its economic prosperity over the years,are becoming vulnerable.

"The lesson of the 1930s is that protectionism might seem to treat the symptoms of the downturn, but it is a poison as far as global recovery is concerned, because it puts a structural check on future economic growth," British Business Secretary Peter Mandels on warned in February.

An innovative solution to the economic dilemma might be the green economy, which is also expected to be addressed.

A recently-released UN report said that investing one percent of the global output into key sectors could achieve a "Green New Deal" and pull the world out of the financial crisis.

Source: Xinhua

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