G20: Global Recovery Plan Agreed

In a clampdown on banking secrecy, countries meeting at a G20 summit in London also agreed to new blacklists of tax havens - one of which French President Nicolas Sarkozy said would include Switzerland.

The Organisation for Economic Cooperation and Development (OECD) divided countries into three categories of "white," "grey" and "black": those who comply with rules on sharing tax information, those - like Switzerland - who say they will but have yet to act, and nations that have refused to change banking secrecy practices.

Under the agreement reached in London, countries refusing to adopt new rules on financial openness could face tough sanctions - including the withdrawal of investment funding by the World Bank or International Monetary Fund.

It follows growing concern that banking secrecy in tax havens has helped to worsen the economic crisis by disguising the true value of some global assets.

"Everyone around the table wants an end to tax havens," said Sarkozy, adding that Switzerland could move off a "grey list" if it ratified OECD agreements.

The global action plan agreed by the group of the leading industrial and developed countries also includes tightening financial rules to bring hedge funds and credit rating agencies under closer supervision.

"This is the day that the world came together to fight back against the global recession. Not with words but a plan for global recovery and for reform and with a clear timetable," said British Prime Minister Gordon Brown, the summit host.

He said that although no new stimulus measures had been agreed, leaders had pledged an "unprecedented" US$1 trillion (CHF1.13 trillion) in loans and guarantees to impoverished countries that are available through the IMF and other institutions.

In addition, the IMF would see its own resources tripled, with up to US$500 billion of new funds.

The G20 also agreed a trade finance package worth US$250 billion over two years to support global trade flows and announced the creation of a supervisory body to flag problems in the worldwide financial system.

"Turning point"

Swiss President Hans-Rudolf Merz welcomed the G20 economic recovery measures but described the inclusion of Switzerland on a "grey list" as questionable and "unpleasant".

He said Switzerland would continue to closely monitor what happened abroad and said the G20 countries needed to be patient and wait for negotiations on double taxation agreements to be concluded.

Economics Minister Doris Leuthard responded on Thursday by saying Switzerland would continue to fight the automatic exchange of information about bank clients but added it was important that the Swiss financial industry was "clean" and could compete due to its "quality, efficiency and expertise."

Attending his first international summit, United States President Barack Obama hailed the succession of London agreements as a "turning point in our pursuit of global economic recovery".

Sarkozy said the results were beyond what could have been imagined, while German Chancellor Angela Merkel called the measures "a very, very good, almost historic compromise" that would give the world "a clear financial markets architecture."

Concrete action

Nouriel Roubini, professor of economy at New York University, told swissinfo the overall result was a "net positive outcome" because the resources of the IMF were increasing, allowing it to help emerging markets that are in trouble.

"Given the collapse of global trade it was important to make a financial commitment to restoring trade finance," he said. "They also said they would do whatever was necessary in terms of micro-policy [for example, bank bail outs and economic stimulus packages] to get us out of this recession."

"I would have liked more aggressive commitment to policy action like monitoring fiscal stimulus. There is some disagreement between the US and Britain on the one hand and Europe on the other about how much fiscal stimulus must be done. Because of that the results are not as strong as they could have been."

Jean-Pierre Lehmann, professor of international political economy at IMD business school in Lausanne, warned that concrete action was needed.

"This all sounds very good but so did what came out of the [G20] November 15 meeting in Washington DC. You read the declaration ... and then you realise that subsequent to it hardly anything at all ensued or indeed in some cases there were contradictions or reversals to what had been indicated."

"So what I cannot appreciate for the moment is how much of what is being said is actually actionable."