British Prime Minister Gordon Brown warned on Friday against a retreat into financial protectionism and urged political and business leaders to work in concert on ways to solve the global economic crisis.
Corporate chiefs and financial policymakers met behind closed doors at the World Economic Forum to lay the groundwork for new regulatory structures and shape a global response to the financial and economic shocks.
Citing an estimated $800 billion collapse in cross-border lending and investment to emerging markets since 2007, Brown said the world should be wary of "financial mercantilism" where battered foreign banks repatriate money and retreat from global finance.
"This, if we do nothing, will lead to a new form of protectionism, a retreat of globalisation and a reduction of trade and cross-border activity," Brown told a joint news conference with United Nations Secretary General Ban Ki-moon.
"This will be followed quickly by the old trade protectionism of the past," said Brown, who will chair Group of 20 leaders at a second financial summit this April.
Speaking ahead of the arrival of German Chancellor Angela Merkel, who will also address the World Economic Forum on the financial crisis on Friday, Brown laid out a three-point plan for tackling the crisis.
Britain hopes to focus governments around stabilising their banks, agreeing a worldwide fiscal stimulus and reigniting lending again to businesses and households everywhere.
"This is a time not just for individual, national measures to deal with the global financial crisis. This is the time … for the world to come together as one," Brown said.
Outlining the multiple shocks absorbed by the world's poorest over the past year — soaring energy and food prices and now a credit freeze — the UN chief urged world leaders not to forget the world's poorest, whom he called the "bottom billion".
"We must stand by those who are most vulnerable," Ban said, flagging the risk that the crisis deflects attention away from climate change, water shortages, poverty and underdevelopment.
CLOSED-DOOR SESSIONS
Finance ministers, central bank governors and their advisers from a number of G20 members — which include the Group of Eight rich nations and leading emerging economies from Asia, Latin America, eastern Europe and Africa — along with bankers and corporate chiefs met at a series of closed-door events in Davos.
One delegate said there was a sharing views but no concrete actions resulting.
"There is a considerable expectation for the G20. We share the notion that we are in a crisis," Heizo Takenaka, a former financial services minister in Japan, told Reuters. "Cooperating within the G20 framework is important."
Senior bankers attending Davos include the chairmen of HSBC and Barclays and the president of Credit Suisse.
HSBC Group Chairman Stephen Green suggested a "Business 20" — or B20 — as a counterpart to G20, comprising the world's largest companies to help inform the policymaking agenda.
"It would only be valuable if the G20 valued it," he said.
Many bankers and investors are concerned that the political reaction to both the financial crisis itself and the billions of dollars of taxpayers' money needed to bail out the banks will lead to heavy-handed regulation of financial services.
"Financial institution regulation is coming and it's coming in a very major way," said Henry Kravis, founding partner of private equity giant Kohlberg Kravis Roberts. Britain's Brown said this was not time to wait and see, applauding what he said was already the biggest global fiscal stimulus in history at some $1.5 trillion worldwide.
Brown also said banks around the world had already been recapitalised to the tune of $700 billion and guarantees on bank borrowing and lending amounted to a staggering $7 trillion.
The area that needed most work now was getting the banks to lend more to strapped businesses and households, he said.
"Not to make a decision, the policy of doing nothing, will allow this crisis to start a retreat from globalisation with huge implications for prosperity in every part of the world in the years to come," he said.
