G20 REFLECTIONS: GORDON BROWN DESERVES CREDIT FOR

UNCLAS SECTION 01 OF 02 LONDON 000821

SENSITIVE
SIPDIS

E.O. 12958: N/A
TAGS: ECON EFIN ETRD EINV UK
SUBJECT: G20 REFLECTIONS: GORDON BROWN DESERVES CREDIT FOR
"WATERSHED" SUMMIT, BUT NO SILVER BULLETS

LONDON 00000821 001.2 OF 002



1. (SBU) Summary: The London G20 Summit emphasized a new global
partnership and produced impressive commitments on trade, the IMF
and regulatory reform, according to panelists at a Business for New
Europe seminar. They were impressed by the G20's recognition of the
need for global coordinated action and acknowledgement that no
country can solve the economic problems alone. Panel members were
cautiously optimistic about commitments on protectionism and trade
and were impressed by the extent of the announced changes to the
IMF. However, panelists cautioned that the commitments will take
time to implement and don't provide any silver bullets to global
economic recovery. The panelists were disappointed at the lack of
detail on toxic assets and would have welcomed further discussion on
global macro balances. There was consensus that Gordon Brown
deserved credit for the Summit and that the EU, or at least France,
Germany and the UK, were particularly successful. The G20's
relevance going forward will depend, they agreed, on its ability to
turn its commitments into reality. End summary.

Morning After
--------------


2. (SBU) Panelists at a Business for New Europe (BNE) seminar were
cautiously optimistic about the outcomes of the G20 Summit. During
a "Morning after the Day Before" discussion, they said commitments
from the G20 leaders were encouraging and impressive. There was a
consensus that the G20 communique took positive, significant steps
on a number of important issues. They were impressed by the G20's
recognition of the importance of greater coordinated action, with
Baroness Ashton, the European Commissioner for Trade, calling it a
"watershed" Summit that removed the distinction between developed
and developing worlds and replaced it with a new global partnership.
The panelists were impressed with the leaders' clear understanding
that the most vulnerable countries must be considered and that no
one country can solve the economic problems alone. Peter Sands,
chief executive of Standard Chartered, said the markets were
particularly encouraged by the outcome of the Summit and dismissed a
press report that the FTSE's 5 percent gain was more about the ECB's
interest rate decision than the G20 action. He noted that the 2009
Summit's achievements stand in stark contrast to the failure of the
1933 London Summit.

Action Items
--------------


3. (SBU) The panel was largely enthusiastic about the discussions
on protectionism and trade. The G20's acknowledgement that talk
about the perils of protectionism needed to be accompanied by a
mechanism for naming and shaming was particularly welcomed. The
communique, they said, importantly signaled movement beyond just
finger pointing and established a firm commitment to preserve free
trade. On Doha, Baroness Ashton highlighted the significance of the
G20 leaders putting a figure of $150 billion on the deal - noting it
was the first time there had been recognition across the G20 of the
value of an agreement. She said the lack of a concrete timetable
for concluding the development round was not surprising, given the
new U.S. administration and the Indian elections. She noted that
the EC is pushing to ensure that the U.S. does not reopen issues
that have already been agreed.


4. (SBU) Panelists were similarly impressed by discussions of IMF
reforms, which equated to a "revolution," according to Sands. Sands
was surprised how tangible the IMF commitments were. He was
encouraged by the consensus that a more powerful, independent and
representative IMF is needed. He warned that the difficulty will
come when trying to balance the IMF's independence with its
representational role. "Smart regulation" will be the watchword of
the future, according to Baroness Ashton. Roland Rudd, Chairman of
the BNE, said the most important part of the Summit was that it
didn't result in greater regulation in Europe than elsewhere, which
could have harmed London's position as a global financial center.
Going forward, panelists agreed the leaders will need to focus on
how the big numbers can be converted into concrete actions.



5. (SBU) Despite these achievements, the Summit didn't provide any
silver bullets and its commitments will take time to implement.
Additionally, the lack of detail about how to clean up toxic assets
from banks' balance sheets was worrying, according to George Parker,
political editor of the FT. He added that supporters of fiscal
stimulus will be disappointed by the communique. In contrast to
other panelists, he said the communique's language on Doha moved
backwards from the language at the Washington Summit. Sands was
disappointed that little was discussed about global macro balances.
He cautioned that some of the "warm fuzzy" feeling will be lost in
the short term when leaders will need to politically reconcile the
big G20 commitments with continued bad economic news.


LONDON 00000821 002.2 OF 002


Who Won?
--------------


6. (SBU) There was consensus that Gordon Brown deserves credit for
the Summit. Parker noted that few other world leaders have
sufficient grasp of the technical details or are as passionate about
the issues as the British Prime Minister. He said the PM's work on
establishing the importance and relevance of the G20 will be an
important part of his legacy. He added that while each country will
claim its own domestic victory, the Summit proved particularly
successful for the EU. France and Germany in particular, he said,
overcame U.S./UK resistance to calls for tighter regulation. He
said their position was strengthened by the de Larosiere report
combined with a new U.S. administration. Parker suggested that
Gordon Brown saw the value of the EU for the first time, because it
could draw real weight to push ahead its agenda. The panelists
acknowledged, however, that it is not entirely clear whether the EU
was effective, or whether it was French/German/UK intergovernmental
effectiveness. They said the three countries act like an informal
directorate of the EU, with Jose Manuel Barroso acting as the fourth
member, representing the other 24 states. Baroness Ashton noted,
however, that Barroso is an effective politician, mindful of
representing smaller states


7. (SBU) Barroso achieved his five aims for the summit, according
to Ashton. Prior to the Summit, he called for the coordination of
fiscal stimulus, more effective regulation, global governance
stimulus (namely reform of the international financial
institutions),a commitment to free and fair trade, and a
development and climate stimulus. Ashton said Barroso was
successful in achieving these five goals. Parker highlighted
another Summit "hero," Mario Draghi, chair of the Financial
Stability Forum, who produced consensus on complicated, technical
issues. While there is still a lot to do on financial architecture,
Parker was surprised at how much Draghi was able to achieve.
Although Parker was impressed by the summit results and the Prime
Minister's performance, he, as an aside, ridiculed the $5 trillion
figure touted by HMG as the size of the G20's combined stimulus
packages as a "ludicrous figure" based on a crude and misleading
calculation.

Future Relevance of the G20
--------------


8. (SBU) One of the most important aspects of the Summit, according
to the panelists, was that it showed the G20 functioning properly
for the first time. Whether the G20 delivers on its action items
will determine its relevance going forward. If the G20 works, and
proves to be an effective decision-making forum, panelists agreed
that more items will be taken from the G8 agenda. Parker expects
the G8 to "whither on the vine" because it hasn't "covered itself in
glory" in terms of delivering on its commitments. The focus, he
said, will shift to the G20 which will outlast the current financial
crisis. Baroness Ashton suggested the importance of the G8 as a
decision-making forum will remain and said the G20 needs to be more
than just summitry, it needs concrete results if it is to remain
relevant. The panelists were encouraged by the move beyond the G8
clique and said the G20 feels like a more representative, effective
body. Despite the G20's raised profile, Parker noted that there is
still no permanent secretariat and that its success depends on the
strength of its chair.

LEBARON