Brown hails summit’s $1trillion support deal for world economy

Gordon Brown last night hailed the comprehensive $1trillion support package for the world economy which will see leading nations come together to “clean up” the banks and bolster the system of global regulation.

He said the deal agreed by the G20 leaders at the ExCel Centre in London would shorten the global recession and save jobs around the world.

“This is the day that the world came together to fight back against the global recession, not with words but with a plan for global recovery and reform,” he said.

“Today’s decisions, of course, will not immediately solve the crisis – but we have begun the process by which it will be solved.”

The agreement represented a diplomatic coup for Mr Brown after French President Nicolas Sarkozy and German Chancellor Angela Merkel had threatened to scupper a deal unless there was tougher action to reform the global financial system.

In the event, both leaders proclaimed themselves satisfied with the outcome – which included new rules on bankers’ pay and bonuses, a crackdown on tax havens, and curbs on hedge funds.

Mr Sarkozy said “a page has been turned” on the “Anglo Saxon” financial model, while Mrs Merkel said it represented “a very, very good, almost historic compromise”.

US President Barack Obama said: “By any measure, the London summit was historic. It was historic because of the size and the scope of the challenge that we face and the timeliness and the magnitude of our response.”

News of the deal prompted a surge of confidence on London’s Stock Exchange with the FTSE 100 closing up 169.4 at 4,125.

A key plank of the deal is the injection of $1.1trillion (£6.8billion) of additional resources for the International Monetary Fund and other international institutions – the biggest rise in their history, according to Mr Brown.

The IMF’s resources will be trebled from $250billion (£170billion) to $750billion (£510billion), while the special “drawing rights” made available by the IMF – which can be converted by national governments into currency to provide a swift injection of liquidity into their economies – will be increased by a further $250billion.

There will be a $250billion trade support package through the World Bank, while lending to low-income countries by the multilateral development banks – including the World Bank – will be increased by at least $100billion (£68billion).

Mr Brown said the new rules on bankers' remuneration – establishing “sustainable compensation schemes” – would ensure “no more rewards for failure”.

The international regulatory system will be extended to cover all institutions – including hedge funds and other elements of the so-called “shadow” banking system.

Tax havens which refuse to accept international rules will face sanctions, with the Organisation for Economic Co-operation and Development publicising those that failed to meet the standards.

On trade, there are commitments not to retreat into protectionism. Mr Brown also confirmed there would be another G20 summit in New York this September – to monitor progress on meeting the deal’s commitments.

Shadow chancellor George Osborne said failure to secure a co-ordinated “fiscal stimulus” meant there would be no “cover” for Chancellor Darling to announce a spending surge in his Budget.

Live Aid campaigner Bob Geldof said the deal would have “far-reaching implications” for the world’s poor.

“The key point for the 50% of the planet who live on less than $2 a day must be that they have finally been brought in from the margins,” he said.