REASONABLE COMPRISES FROM TORONTO SUMMIT - Leaders at the G20 summit this weekend in Toronto agreed to cut national budget deficits and promote economic growth, though every major G20 country had in fact already committed to halve deficits within three years. The Canadian prime minister, Steven Harper, said that as well as the cuts, short-term economic stimulus measures would still be needed. Proposals for a global levy on banks were dropped - these will now be left to individual countries. Tighter regulations, including bigger capital requirements for banks, will be addressed at the next G20 summit in Seoul, South Korea, in November. Leaders insisted on implementing tough capital rules to force banks to hold sufficient buffers to guard against a future crisis, but they signalled a delay before those take effect. They said banks must hold sufficient capital to withstand future losses in a crisis as severe as that in 2008.
Paul Hannon, at Dow Jones Newswires, says that the summit went 'reasonably well' for the world leaders, while two different recovery paths did emerge. He says that there had been a row brewing between the US and Europe on how quickly a country manages to cut its debts while at the same time continuing to stimulate the economy. He says a reasonable compromise emerged, which makes allowances for some countries to continue to engage in stimulus policies while others can concentrate on their deficits.
Tracing the history of the G8 and G20 groups, Mr Hannon says they were designed to stop a reoccurrence of what happened in the 1930s and the move to protectionism. The groups aim to minimise and manage the consequences of the recession and have prevented protectionism on a big scale, though he admits that some industries have moved in this direction.
Mr Hannon says that progress on the banking issues is proving grindingly slow and the leaders left 'awful lot' to debate to the South Korea summit in November. He says that at one stage, the Koreans had feared there would be nothing left to decide at their summit, but now they will have 'loads' to do. He also says that the riots and looting witnessed at the Toronto summit over the weekend may be the start of a radical politicisation of the global crisis.
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MORNING BRIEFS - Reports over the weekend suggested AIB Group plans an institutional placing of its 22.5% stake in M&T Bank if merger talks between M&T and Spain's Banco Santander can not be revived. Santander confirmed it has held talks on merging its US operations with M&T and it is trying to revive those talks after initial discussions fell apart over the issue of control. AIB needs to raise €7.4 billion this year to meet new capital rules after the transfer of loans to NAMA. As well as M&T, AIB will sell its majority holding in its Polish Bank Zachodni and its British businesses.
*** Oil prices are higher this morning as a major tropical storm heads towards the Gulf of Mexico. New York's main contract climbed 36 cents to $79.22 a barrel while London's Brent rose 36 cents to $78.48. Analysts said the market is watching the first major storm of the Atlantic hurricane season, which heads towards the southwestern Gulf of Mexico, threatening oil platforms in the area. Prices were higher last week because of the potential impact of Tropical Depression Alex on global energy supplies.
*** On the currency markets this morning the euro is trading at $1.2377 cents and 82.2 pence sterling.
