Obama warns G20 leaders against giving in to 'fear'

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Indy Politics

Barack Obama warned G20 leaders against giving in to "fear" and getting into a blame game today, on the eve of the crunch summit to rescue the global economy.

At a joint press conference with Gordon Brown, the president admitted that the US had some "accounting to do" over its responsibility for the crisis.

But he also insisted that financial regulatory systems had been "mismatched" all around the world.

The comments came amid last-minute jockeying among G20 leaders, with the French president Nicolas Sarkozy upping the ante by suggesting he was not happy with the way negotiations were going.

The Prime Minister and Mr Obama both stressed today that they believed there was considerable "common ground" among the nations and an "unprecedented" agreement would be reached.

But, asked about Mr Brown's repeated claims that the crisis started in the US, Mr Obama cautioned against allowing blame to take over.

"If you look at the sources of this crisis, the US certainly has some accounting to do with respect of a regulatory system that was inadequate to the massive changes that had taken place in the global financial system," he said.

"What is also true is that here in Great Britain, and continental Europe, around the world, we are seeing the same mismatch between the regulatory regimes that were in place and the highly integrated global capital markets that had emerged."

He went on: "At this point I am less interested in identifying blame than in fixing the problem. I think we have taken some very aggressive steps in the United States to do so."

Mr Brown responded: "What has essentially happened is that the speed and the pace and scope of the global financial changes, the mobility of capital around the world, overwhelmed systems of national regulation."

The PM dismissed suggestions that the French president may walk out of the summit if he did not get the tough global financial regulation he wanted.

"I'm absolutely confident that President Sarkozy will not only be here for the first course at our dinner, but still be sitting as we complete our dinner this evening," he joked.

Mr Brown added: "We are within a few hours, I think, of agreeing a global plan for economic recovery and reform. I think the significance of this is that we are looking at every aspect...

"Of course it is difficult and of course it is complex - we have a large number of countries - but I am very confident that people not only want to work together but we can agree a common global plan for recovery and reform."

Mr Obama insisted he remained "a big believer in global markets" and wished to see them functioning well.

But he added: "What we have to understand is that that is going to require some sort of regulatory framework to ensure it doesn't jump the rails. That is something that I think we are going to be able to put together."

Mr Obama rejected suggestions that the leaders meeting in London were deeply riven by splits over fiscal stimulus, regulation of the financial system and support for poorer countries.

"I am absolutely confident that this meeting will reflect enormous consensus about the need to work in concert to deal with these problems," he said.

"The separation between the various parties has been vastly over-stated."

Countries which have been depicted as opposing fiscal stimulus packages of tax cuts and state spending have almost all already produced stimulus programmes of their own, he said.

"There has not been a dispute about the need for government to act in the face of a rapidly contracting set of markets and very high unemployment," he said.

Differences over the shaping of a further stimulus and about the extent to which European welfare systems were automatically injecting money into the economy were no more than "arguing in the margins", said Mr Obama.

"The core notion that government has to take some steps to deal with a contracting global marketplace, and that we should be promoting growth - that is not in dispute."

He added: "The notion that somehow there are those pushing for regulation and those resisting regulation is belied by the facts."

There was "complete concurrence" among G20 leaders about the need to protect emerging markets and help poorer countries through the recession, said Mr Obama.

President Obama appealed for families to make decisions on spending or saving with confidence in the future.

"Basing decisions around fear is not the right way to go," he said.

It was understandable for families to be cautious, said Mr Obama, but he went on: "Despite the current hardships, we are going to get through this.

"So you should plan sensibly in anticipation that this economy is going to recover.

"Young families are going to want to buy new homes and sooner or later that clunker of a car is going to wear out, so people will buy new cars.

"I would ask people to have confidence about their futures and that may mean in some cases spending now as investments for the future.

"Don't short change the future for fear of the present."

Speaking earlier, Mr Sarkozy warned that France would not tolerate "false compromises".

"As of today, there is no firm agreement in place," he told Europe 1 radio. "The conversation is going forward, there are projects on the table. As things stand at the moment, these projects do not suit France or Germany."

Applause was audible from staff at 10 Downing Street earlier as Mr Obama entered the building.

Mr Obama landed at Stansted airport in Essex last night, making Britain the first country outside North America he has visited as president.

He stressed the importance of the "special relationship" between the UK and America, and said he was pleased that his first meeting overseas was with Mr Brown.

"The United States and the United Kingdom have stood together through thick and thin, through war and peace, through hard times and prosperity," he said.

"We have always emerged stronger through standing together."

He went on: "All of us owe Prime Minister Brown an extraordinary debt of gratitude for his preparations on what I believe will be an historic and essential meeting of the G20 nations."

Mr Brown will also hold talks at No 10 today with Russian president Dmitry Medvedev, Indian prime minister Manmohan Singh, Chinese president Hu Jintao and Japanese prime minister Taro Aso as he seeks to finalise the details of a communique which has been the subject of intensive behind-the scenes negotiation over the last few weeks.