Yesterday the leaders of the G-20 met to discuss how international cooperation could facilitate economic recovery as well as stymie similar crises in the future.

President Obama, who met one-on-one with several foreign leaders, is seeking to establish the United States as a leader within the group, restoring international confidence in the nation’s ability to usher in economic recovery.

The G-20 countries have already reached a general consensus to bolster the funds available to the International Monetary Fund as the recession deepens. Furthermore, most governments have advocated increased regulation of banks, hedge funds, and exotic derivatives.

The greatest split lies in the divide between those countries that propose stimulus and those that support more advanced global regulation as the vehicle by which the world will reemerge from economic turbulence.

President Obama has advocated an immediate and robust global stimulus to increase consumer demand around the globe, and has found steadfast allies in both Britain and Japan.

The difficulty, however, will be persuading France and Germany that increased stimulus will have a favorable effect even on the countries of the European Union, which already boast established and expensive public social services.

BRITAIN
President Obama and British Prime Minister Gordon Brown have both established their emphasis on increased global stimulus over increased regulation. This week, Brown proposed an increased $100 billion to stimulate global trade, a position shared by the United States. Like the United States, Britain favors increased regulation of the financial services industry but rejects the proposal for an international global regulatory agency or czar, supporting instead the establishment of domestically oriented “systemic risk” regulators.

JAPAN
Having already enacted two unsuccessful stimuli to the tune of US $101 billion, Japan asserts its third attempt will be ready by mid-April. However, the nation will likely find itself hampered by mounting debt that will reach 197% GDP by next year. Prime Minister Taro Aso has indicated a willingness to align with the positions of the United States and Britain, favoring increased and immediate global stimulus and an increase of nationally monitored financial regulation. Finance Minister Kaoru Yosano has additionally expressed a desire to curb deflationary pressure, a view that contrasts with the inflationary concerns of several BRIC (Brazil-Russia-India-China) nations.

BRAZIL
President Lula seeks an increased role for both Brazil and other emerging economies across the globe. Brazil has advocated the increased involvement of both Brazil and India in the World Bank and International Monetary Fund. Lula blames the exacerbated losses of emerging economies in the global downturn on the lack of credit available to developing economies. In addition, Brazil has voiced moderate support of China’s proposal to establish an international currency to replace the dollar as the primary instrument of foreign trade.

INDIA
India has demonstrated a greater willingness to ally with the United States and has not embraced the notion of a global currency or centralized bank. India has been particularly vocal in its intention to avoid protectionist tendencies, pledging to “to avoid protectionism in the trade of both goods and services.” Having experienced tremendous economic growth as a result of foreign outsourcing, India hopes to dissuade foreign governments from protectionist legislation that would discourage outsourcing.

CHINA
China has remained the most isolated of any major economy from the effects of the global downturn, and as a result, is poised to be a significant power-broker. China has advocated the increased involvement of developing economies in the International Monetary Fund, and supports the largely unchallenged increase in IMF funding. More controversial, however, has been China’s proposal for an international reserve currency to replace the US dollar as the dominant medium of trade. The United States and Britain have both rejected the proposal, while fellow BRIC nations Brazil and Russia have both expressed support.

RUSSIA
Russia has been particularly hard-hit by the economic crisis. Despite losing 30% of its value and battling high inflation and staggering unemployment, Russia’s minimal debt and lack of exposure to US toxic assets means that it may be in a more favorable position going forward than other G-20 nations. Russia has allied with other BRIC nations and joined them in their call for the increased involvement of developing economies in the financial system. President Obama met with Russian President Medvedev, who also expressed regret about the “drifting” Russian-American relations of the past eight years.

GERMANY AND FRANCE

The two European Union governments have positioned themselves as inextricably linked in the current economic crisis. German Chancellor Angela Merkel said the two countries “defend a totally identical position.” Both countries prove the greatest obstacle to consensus as proponents of increased regulation, not stimulus, as the necessary course of action beyond the G-20. Germany and France advocate an increase of global regulation which would reach inside the United States financial framework. Both President Sarkozy of Frances and Merkel have joined in staunch opposition to President Obama and Prime Minister Brown’s support for further stimulus. Germany and France may find common ground with the United States, however, in their support of certain regulatory policies. A focus on the elimination of tax havens, alongside increased regulation of exotic derivatives and hedge funds, may enable cooperation between the two countries.

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