Thaindian News

Huntsville (Canada), June 26 (DPA) The leaders of the world’s 20 top economies are set to end the 60-year domination by Europe and the US of the World Bank and International Monetary Fund (IMF) at a summit here this weekend, draft documents say.
But they are not expected to approve European Union calls for a worldwide levy on bank risk-taking and a tax on financial transactions, German Chancellor Angela Merkel said.

The leaders of the Group of 20 (G20) “agree that the heads and senior leadership of the international financial institutions should be appointed without regard to candidate nationality”, read a draft summit statement seen by DPA.

G20 leaders still have to approve the text.

Since the two bodies were founded after World War II, the World Bank has traditionally been headed by an American while the head of the IMF has been a European. But the emergence of new powers such as Brazil, China and India has led for calls to overhaul that system.

The G20 itself embodies that change. Since its first summit in November 2008, the club of the major developed and developing states has emerged as the world’s most important economic body.

The G20 is “the premier forum for our international economic cooperation”, the draft says.

Merkel said after talks with the smaller Group of Eight (G8, which joins the world’s major developed economies) that neither body was likely to endorse EU calls for bank and transaction taxes.

EU leaders at a summit June 17 called on the G20 to bring in both measures as a way of forcing banks to take fewer risks.

The EU as an institution is a member of the G8, alongside its largest member states, Britain, France, Germany and Italy, and Canada, Japan, Russia and the US.

After the G8 talks Friday, Merkel said: “I think it is becoming clear that we Europeans have a more positive approach (to the tax issue) … but other countries will not join in.”

That impression is likely to be reinforced at talks with G20 leaders on Saturday and Sunday, she said.

Diplomats from fellow-G8 and -G20 member Russia echoed that view.

“In most states, the problem is that the banking sector has not reached pre-crisis levels of lending to the real economy … The introduction of such taxes and levies would hardly be a factor to stimulate such lending,” said Andrei Bokarev, a financial advisor to Russian President Dmitry Medvedev.

Sweden has already brought in a levy on its banks, and Britain, France and Germany have all pledged to do so. However, the bloc is thought less likely to bring in a tax on financial transactions, out of fears that that would force such business abroad.

After the G8 meeting, G20 leaders are set to gather in Toronto Saturday afternoon and spend the rest of the weekend discussing the impact of the world financial crisis and the best way to reform their economies after it.

Ahead of the summit, diplomats said that a rift had opened between Europe and the US over the question of how fast to reel in government crisis spending in order to reduce the budget deficits it has caused.

European states are prioritising deficit reductions in response to the sovereign debt crisis that rocked Greece earlier this year. The US has expressed concerns that the move might impose such steep cuts that it pushes the economy back into recession.

The draft statement treads a careful line between those positions, saying: “To sustain recovery, we need to follow through on delivering existing stimulus plans. At the same time, recent events highlight the importance of sustainable public finances.”

Bokarev suggested the likely shape of a final compromise saying: “The exit (from stimulus plans) should be coordinated, but that doesn’t mean that all countries have to start at the same time.”