'I Take Responsibility' Obama's G-20 Confession
Part 2: Fighting over Each Word
Now the full-scale wrangling began. They argued over sentences, phrases and individual words, but in the end these words would be decisive, would dictate a transformation or a continuation of business as usual. Victory or defeat. Triumph or humiliation.
The world was expecting from the heads of state and government an answer to the question of what will happen now that global capitalism has crashed. But there were other expectations as well -- national expectations. Everyone here at the table had a reputation to lose on their home turf. In the run-up to this event, they had all told their constituents what they intended to push through here at this table. They knew that people back home were watching carefully to see how they would perform.
Shortly before noon, Merkel had finished pleading her case for regulation of the financial markets. Her red jacket radiated among all the dark suits like a buoy in the sea.
Now it was a question of what positions the other countries would take -- a question of determining the top issues at the summit. Obama and Brown had repeatedly said that regulation and tax havens were of secondary importance. Merkel and Sarkozy wanted to give them priority. The previous evening, Merkel's advisers had estimated that she had a fifty-fifty chance of pushing through her agenda.
So it was important now to hear from the Chinese leader, the representative of the superpower of the future. Hu Jintao began by saying that he wanted to make some remarks concerning strengthening financial oversight. He said it was "very appropriate to strengthen financial regulation." There must be external supervision, no self-regulation. He added that an impenetrable barrier should be put up between the conventional banking world and investment banks. "Shadow banks" and hedge funds should be abolished. And he called for an early warning system. Those were clear words. The German chancellor nodded with satisfaction. China had come through.
But this was followed by a bitter setback for the supporters of regulation. Japan's Prime Minister Aso said that it would be better "not to rush forward with regulations and supervisory plans." Japan had countered China, as has often been the case in history. The contest remained undecided.
At 12:10 p.m., Brown gave "Nicolas" the floor. Sarkozy at first adopted a decidedly polite tone. "The communiqué is truly outstanding," said the French president. "We have, and you have, Gordon, done outstanding work. But there remains a problem that we have to face up to. Is there a list of tax havens: yes or no?"
Over the next few hours, the dispute over the list became a symbol for just how serious the world's most powerful leaders are about creating a world with new, fair rules. It served as a measure of their willingness to initiate reforms.
This list already exists. At least, the OECD has all the data required to publish it at short notice. But until now it has met with political resistance. The list names those countries that get rich at the expense of other countries by doing business with dirty money from tax evaders. Now the question is whether -- with the approval of the G-20 -- the list should be made public as a modern form of putting someone in the stocks.
Sarkozy needed this list. He had promised the French that he would get it in London, that it was non-negotiable, and that he would leave if his demand wasn't met.
Of course he was fighting for more -- for a new economic model, for more regulation and restrictions. This also included a new, more stringent system of bank supervision, a watertight monitoring of all financial products -- but also the fight against tax havens.
Brown had not mentioned the list in his draft version of the communiqué. "We all know that there are tax havens," the Frenchman informed his British counterpart. And he said that every one of them threatened the global financial system.
Sarkozy worked himself into a fury. Two-thirds of all financial risks, he said, lie dormant in the tax havens -- some $1.8 trillion is hidden in the Cayman Islands alone. "These are the countries where there is crime and speculation." Nobody at this table abides speculation, he said. Why then "shouldn't we publish the list today? The list exists, of course. That would be an honest approach."
Then the Netherlands joined sides with those who favor regulation. "I totally agree with what Angela Merkel has said and I would like to support her," said Prime Minister Jan Peter Balkenende.
This was followed by yet another setback for Merkel and Sarkozy, a blow that came from their own ranks. Czech Prime Minister Mirek Topolánek, who currently holds the rotating presidency of the EU, addressed the conference. He spoke at length against issuing a list. Many countries had announced "that they would now respect the rules," so such an instrument was no longer required, he said. The German delegation suspects that Luxembourg Prime Minister Jean-Claude Juncker was behind this intervention. After all, his country has a rather murky reputation when it comes to tax matters.
Then Brazil's President Luiz Inácio Lula da Silva made a small but nasty comment. He presented concrete proposals for who exactly should stand on the list of evil, tax-dodging countries. "I think that Costa Rica, Guatemala, Malaysia, the Philippines and Uruguay should also be condemned," he said.
Suddenly, the conference resembled a world court. Countries whose names were quite openly mentioned sat in the dock. Prosecutors presented arguments, and lawyers rushed to the defense. And Gordon Brown presided over this world court like a judge.
With a sonorous voice, he tried to keep a tight rein on the debate. At 12:15 p.m., Brown adjourned the first part of the plenary session and invited everyone to eat lunch. The heads of state and government sat at four long tables that were arranged in a square. Now the constellations were smaller and more intimate than in the larger format of the plenary session -- now those whose opinion really makes a difference found themselves sitting together over liver paté and vegetable strudel.
At the lunch table, World Bank President Robert Zoellick was asked to give an overview of the crisis. "If I say too much, then tell me and I'll stop," said the American, and then he began his dramatic analysis.
"For the first time since 1945, the global economy has shrunk. We expect it to contract by 1.5 percent," he said. "Infant mortality will also rise. That's 200,000 babies who will have to die. The situation in developing countries is particularly dire. Today, there have already been massive job losses in Botswana and Sri Lanka. Even growth in China is critical."
Zoellick noted that the situation continues to be uncertain and that "2009 will be a dangerous year."