Markets and economists around the world have reacted positively to the April 2 G-20 Summit. The main outcome of the summit is a communiqué which expresses the intentions of the leaders present. These included additional support to the International Monetary Fund, blocking protectionism, regulation of credit-rating agencies, expansionary monetary policy and international cooperation on improving international financial regulation. The communiqué also refers to problems which were unrelated to the global crisis — tax havens and hedge funds — but this seems to have been caused by some negotiations between the Americans and the Europeans. Among the items that are important to today’s crisis but were missing from the communiqué were fiscal expansion, questions about whether the dollar should remain a reserve currency and a coordinated attempt at cleaning up bank balance sheets.

Like any such communiqué, this one is also only the beginning of a long process of negotiations. However, if the leaders present are sincere about their intentions, then even though the outcome may help the world out of the current crisis only to a limited extent, it will help in making the world a safer place in the future.

The increased resources for the IMF, multilateral development banks and for trade credit to the tune of a trillion dollars will help both in the short and long runs. Though it is not clear who will be putting the additional money into these institutions, when the money becomes available to nations in trouble, it will surely be of immense help. It will also help in the long run as it may prevent more countries from building up large dollar reserves, which was one of the main causes of the present financial crisis.

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