Obama Aims to Overcome G-20 Discord on Economic Plan

By Hans Nichols and Edwin Chen

April 1 (Bloomberg) -- President Barack Obama arrived in London last night for a summit among leaders of the world’s biggest economies with the aim of overcoming signs of discord in dealing with the global financial crisis.

The president’s agenda for the Group of 20 meetings is to coordinate a response to the recession by spurring growth and coming up with an overhaul of market regulations to include hedge funds, derivatives trading, executive pay and excessive risk-taking by financial firms.

Coming up with a unified approach is crucial for the G-20, which represents about 85 percent of the global economy, Mike Froman, Obama’s deputy national security adviser for economic affairs, told reporters in London.

“We’re gathering the G-20 at a time of the most severe economic and financial crisis in generations,” Froman said at a briefing. “The stakes for this summit are very high.”

The recession has worsened since the leaders last met, in November in Washington. The Organization for Economic Cooperation and Development said in Paris that the economy of its 30 members will contract 4.3 percent this year and predicted unemployment in the Group of Seven will reach 36 million late next year. The World Bank lowered its growth forecast for developing countries this year by more than half to 2.1 percent.

Medvedev, Hu Meetings

Also on Obama’s agenda for his eight-day European trip are U.S. foreign policy objectives. He is scheduled to meet today with the leaders of Russia and China, two nations that are competitors as well as partners with the U.S. on issues such as Afghanistan, Iran, North Korea and nuclear proliferation.

Obama said in March that he wants to “reset” U.S.-Russian relations, which have been strained by a plan initiated by former U.S. President George W. Bush to put parts of a proposed missile-defense shield in Poland and the Czech Republic and by the eastward expansion of the North Atlantic Treaty Organization.

Today’s meeting between Obama and Russian President Dmitry Medvedev will be their first face-to-face encounter. Medvedev wrote in an article published yesterday on the opinion page of the Washington Post that a recent exchange of letters between the two leaders “showed mutual readiness to build mature bilateral relations.”

Obama and Chinese President Hu Jintao also will have their first meeting. Both sets of talks are scheduled to take place at Winfield House, the residence of the U.S. ambassador to the U.K., where Obama is staying while in London.

‘Two Tracks’

After a working dinner tonight, the bulk of the G-20 discussions will come tomorrow. Obama will pursue “two tracks” to coordinate a global response to the recession by “restoring growth, on one hand, and engaging in broad and deep regulatory and institutional reform on the other,” Froman said.

European governments have resisted calls from the U.S. to pump more money into their economies. There also are signs that the consensus on the need for a global regulatory regime are fracturing. French Finance Minister Christine Lagarde told the British Broadcasting Corp. that President Nicolas Sarkozy would walk away from the summit unless it adopts strict international finance regulations.

Sarkozy will refuse to sign any statement if he thinks “the deliverables are not there,” Lagarde said in the interview.

More Oversight

Sarkozy wants to give more economic oversight power to the International Monetary Fund, and more financial oversight to an institution that would derive from the Financial Stability Forum, a group that brings together senior representatives of national financial authorities, regulators, central banks and international financial institutions.

He also has called for the G-20 to publish a list of tax havens that won’t go along with rules on accounting and transparency. Some emerging nations are resisting such a move.

White House press secretary Robert Gibbs discounted differences among the G-20 leaders. “There will be broad consensus about far stronger financial regulations to ensure that what we’re dealing with now never happens again, that we have different rules of the road for the 21st century,” he said aboard Air Force One as the president traveled to the U.K.

Regulation Consensus

Froman said there is a consensus “to expand the scope of regulation to any institution, market or product that’s systemically important to the international financial system and that could include hedge funds.”

He said the G-20 countries want to “encourage” off-shore financial or tax havens to sign on to global accounting and transparency rules.

“There are a number of things in the toolbox that might be available and that’s what’s being discussed this week,” Froman said, declining to elaborate.

How to craft the incentives and how to refer to such tax havens “will get worked out over the next couple of days,” he said.

Obama also this week will attend a meeting of the North Atlantic Treaty Organization that marks the 60th anniversary of the alliance. He will arrive at the NATO summit in Strasbourg, France, and Kehl, Germany, bearing the new strategic plan for Afghanistan he outlined on March 27.

The plan calls for more U.S. troops, establishes benchmarks for improving Afghanistan’s governance, focuses more aid and attention on neighboring Pakistan. It also asks for greater contributions from the military alliance’s members.

During the latter part of the eight-day European trip, Obama plans to meet with European Union leaders in Prague, where National Security Council spokesman Denis McDonough said the president will give a “major address” on nuclear proliferation.

To contact the reporters on this story: Hans Nichols in London at hnichols2@bloomberg.net; Edwin Chen in London at Echen32@bloomberg.net