The week that was - the G20

Last week the leaders of the G20 agreed to a $1.1 trillion package of financial measures which could have a massive effect on the health of the worldwide economy.

The IMF will be a main beneficiary of this agreement, as its coffers swell to $750 billion. Presumably this money will not be used to help the stretched UK economy but many other countries should benefit from the IMF's help.



Tax havens were another part of the agreement, as leaders promised to come down hard on areas such as the Channel Islands and Monaco, but this may be more symbolic than anything else.

Most Monte Carlo residents will have clever accountants who are paid a lot of money to get around financial regulation, but nevertheles this sets down a positive marker and is one step in the right direction.

Nicolas Sarkozy threatened to walk out of the summit if regulation was not boosted, but even he said that the talks achieved "more than we could have hoped for". This will have been a relief for many, not least Gordon Brown, the host leader.

Confidence

The biggest thing to come out of the G20 though was the projection of confidence. President Obama called the summmit "a turning point" in pursuing economic recovery and if this kind of rhetoric inspires confidence then the meeting will have done its job.

The large sums of money are obviously important but the sight of world leaders working together could have just as big of an impact. Confidence is a key part of any economy and if people see things getting better in the future, then consumers are more likley to start spending again.

More important than this though, is confidence within the banks and it will be interesting to see if the banks do begin to loosen their hold on the purse strings. If this happens, then things could improve, but this is a big 'if'.

What must be reiterated is that it will take time for any of the measures agreed to have any impact. So in the meantime the leaders have to try and inspire confidence. The meeting on Thursday was a strong attempt at this.

Brown boosted?

In my last post I said that Brown was gambling his political future on the outcome of the G20 talks, but this was not completely accurate. It now seems clear that Brown knew what would be agreed well before Thursday's summit.

This being the case, he knew he could build up the outcome without much risk of calamity. It could well be the case that the measures will not have the desired effect of boosting the world economy, but right now Brown is in credit.

Before the summit his poll ratings were not looking good, but their decline could now begin to slow. 'Gordon the world leader' is how he would love to be seen and by hosting the apparently successful G20 he may believe that he has achieved this.

In reality Brown is not seen quite in this light, but the summit has certainly not done his image any harm. Indeed many of the British newspapers were very favourable towards Brown's involvement.

The Guardian wrote "Gordon Brown brokers massive financial aid deal for global economy", clearly putting Brown at the centre of the action. Brown's spin doctors would have been thrilled.

Of course this may not last for long, but Brown will bask in this reflective glory for as long as possible. It should be remembered that people will continue to lose their jobs and last week's meeting will soon be forgotten.

Cameron

In terms of where all of this puts the Tories, it is unclear. Obama did meet David Cameron but as an opposition leader there is not much that one can do in such situations except perhaps support the actions taken.

Cameron will not have benefitted from Brown's hosting of the G20 but his party's position has not changed all that much. Last week's events do look good for Brown, but they will not make him instantly electable.

The future

The results of the G20 summit are currently unknown in the long term, but in the short term they will certainly be positive. In times of crisis people want to see their leaders standing shoulder to shoulder.

This may only have happened for a few hours but it was an important symbol all the same. The fact remains though, time will tell if it will make any real difference to the world economy and all we can do is sit and wait.

Will the G20 summit achieve anything?

This week will see the leaders of the G20 descend upon London. The hope is, that they will come to a global agreement to help resolve the world economic slump.

Sadly, the chances of this happening are about as low as Peter Mandelson defecting to the Tories and becoming David "call me Dave" Cameron's right hand man.

The main stumbling block appears to be the need for governments to be seen to be doing the best for their country. As a result, free trade is inevitably being hit hard, and protectionism is blossoming.

Our Prime Minister Gordon "call me Gordon" Brown, has been frantically crossing the globe this week in an effort to convince leaders that they need to pump more money into their economies.

Brown also wants them to up their levels of foreign trade, but this will be a big ask, even for the silver tongued Brown. For too long many countries have had a perception of our PM as someone who loved to lecture others, on how they should run their economies.

This was all too apparent when Brown spoke in Brussels this week. The chamber was only a quarter full and the biggest news to come out of his visit was the attack from a Conservative MEP, Daniel Hannan.

People do not like being lectured, and Brown may now be reaping what he has sown. During the boom years, he was happy to take the plaudits and dish out advice, but now things have turned sour he is less willing to admit his failings.

Brown's favourite phrase at the moment is "fiscal stimulus" but the problem is, the UK may not be able to afford another one. This is a big problem if you are trying to convince other countries that it is a great idea.

Indeed, Mervyn King's words to the Treasury Select Committee this week appear to have confirmed this worry. King said:

"I think the fiscal position in the UK is not one where we could say, 'well, why don't we just engage in another significant round of fiscal expansion'."

For the Governor of the Bank of England to say this as the Prime Minister is looking to launch another fiscal stimulus, it was unlikely to be unrehearsed.

If King is worried about overstretching the British economy, then we should all be worried. One must remember that Keynesian economics are not fool-proof and spending your way out of a recession is an extremely risky business.

Brown has called the Conservatives a "do nothing party" for months now, and laughed at their caution towards hefty fiscal measures, but now it appears they are not alone in having doubts.

The European Commission President, Jose Manuel Barroso warned this week against a second EU stimulus plan, and it should be considered that the initial rounds of demestic stimulus packages will take months to have any real effect.

It should be said though, that King's words do not endorse Conservative economic policy as David Cameron tried to suggest. They do however give the Tories more authority, something they have been lacking when talking about the economy, up til now.

Brown seems worried about doing nothing, or at least being seen to be doing nothing. Indeed, one could argue that by introducing fresh economic measures every week is not achieving anything, in terms of helping people in the real world.

The measures that have already been implemented need to be given time to take effect, and by continually introducing more and more schemes, the government could be perceived as being in a bit of a panic.

New Labour created an idea of an all-providing state, but with the economy faltering this could ultimately be their undoing.

When things get really bad, people will begin to look towards the government, but it is unlikely that they will be able to solve most people's problems.

The state cannot always provide, and the enlargement of the welfare state under New Labour has created a culture of people who feel they are owed something.

In the US, Barack Obama warned against this kind of expectation in his inauguration speech when he said:

"For as much as government can do and must do, it is ultimately the faith and determination of the American people upon which this nation relies."

Governments can only do so much in crises such as the one the world finds itself in today, and it will have to be a huge collective effort that gets us through it.

The G20 summit has been built up massively by Gordon Brown, but anyone expecting a global solution from it may be disappointed.

Of course we are all hoping for a miracle, and no-one more so than Gordon Brown; the man who appears to have gambled his political future on securing a quick fix to this global problem.