World leaders were set to impose new financial rules on Thursday to jumpstart the sputtering global economy and triple the war chest of the International Monetary Fund to fight the worst economic crisis since the 1930s, sources at the G20 summit said, as tens of thousands of protesters from around the world gathered to demonstrate for economic justice and environmental accountability.
After sharp differences over how to restore confidence, representatives of U.S. President Barack Obama and other Group of 20 leaders agreed to submit large hedge funds to supervision for the first time and enhance regulation through a new agency and a beefed-up IMF.
Monetary and developing country sources said the latest draft summit communiqué provided for a $500 billion boost to the IMF's resources, raising to $750 billion the funds it can make available to countries worst hit by the global crisis.
"There's a lot of progress today on making sure the international institutions we have, like the IMF, have got the money they need...to be able to intervene more decisively and more urgently than in the past," British Finance Minister Alistair Darling told Sky TV.
The G20 were also close to agreeing a trade finance package worth $250 billion to support trade flows, a source at the summit in London told Reuters. Brown had been targeting at least $100 billion to help reverse the decline in trade following the credit crunch.
"This is a positive step to jump-start global trade flows. It is a significant contribution towards solving the problem," said Eoin O'Malley, senior adviser on international trade at BusinessEurope, Europe's top business group.
Keen to secure a confidence-boosting message as the world succumbs to recession, Obama has said there are no substantive differences with Europe, despite the hardball stance taken by France and Germany over regulation.
"The most important issue is that we agree ... on the principle that no financial market product, no financial market participant and no financial market can remain without regulation and without supervision," German Finance Minister Peer Steinbrueck told Deutschlandfunk radio.
The global economy is expected to contract in 2009 but between 0.5 and 1.0 percent, according to the IMF, whose head, Dominique Strauss-Kahn, is calling it a "Great Recession."
French President Nicolas Sarkozy and German Chancellor Angela Merkel raised fears that the summit could fail by saying they were not happy with draft conclusions distributed ahead of meeting.
They vowed to stand together to press for "non-negotiable" new global finance rules and resisted pressure -- notably from the U.S. and Japan -- to pledge new stimulus measures to jumpstart their sputtering economies.
"Without new regulations there will be no confidence. And without confidence there will be no recovery. It's a major aim, non-negotiable," Sarkozy told reporters at a joint press conference with Merkel.
When asked about his threat to walk out of the summit if leaders failed to agree on sufficient new regulations, he said: "This is a historic moment and we cannot run away."
Obama and Brown played down the differences but not the scope of the crisis that the summit will have to confront.
"Make no mistake, we are facing the most severe economic crisis since World War II, and the global economy is now so fundamentally interlinked that we can only meet this challenge together," the U.S. leader said.
What is at stake
U.N. Secretary General Ban Ki-moon warned in Britain's Guardian that more than economics was at stake in London.
He said that unless decisive action was taken, the crisis could lead to a "growing social unrest, weakened governments and angry publics who have lost all faith in their leaders and their own future."
The newly appointed president of the International Fund for Agricultural Development (IFAD) warned Wednesday the downturn is threatening to push millions of people into abject poverty, particularly poor rural people in developing countries, most of whom are smallholder farmers that feed two billion people worldwide.