ZOELLICK URGES BALANCED GROWTH

       World Bank president Robert Zoellick yesterday urged the Group of 20 leaders to set an ambitious agenda of "responsible globalisation" at this week's summit.
       Zoellick said the summit should include efforts to promote more balanced growth with financial stability, development and climate change, rather than the narrow focus set at the last G-20 summit in London in April.
       "The challenge for the G-20 iss how do you sustain the momentum and cooperation they were able to achieve cooperation they were able to achieve when staring into the abyss at the time of the London summit as the crisis wanes?" Zoellick told the Financial Times.
       US President Barack Obama hosts G-20 leaders in Pittsburgh starting Thursday for two days of talks aimed at tightening regulations to ensure that a similar global financial crisis never happens again.
       "The core message of Pittsburgh needs to be more than implementing the agenda set in London, which was mostly about financial stability or reforming bankers' bonuses," Zoellick said.
       "I would like the G-20 to talk about responsibly globalisation. That would capture balanced global growth, financial stability, climate change, help for the poorest including our proposal for a new facility to help countries cope with economic shocks not of their own making," he added.
       Zoellick also warned of rising protectionism and called for a robust G-20 response. "We have a low-grade fever of trade tensions and the temperature is starting to rise," he told the Financial Times. he urged the United States and China to settle their dispute over imports. The United States last week imposed punitive tariffs of 35 per cent on Chinese-made tyre imports - a move that prompted Beijing to lodge a complaint at the World Trade Organisation.
       The World Bank last week urged the G-20 nations to step up aid to the poorest countries, saying they lack billions of dollars for critical spending to weather the global economic crisis.
       A year after the collapse of Lehman Brothers plunged global finance into chaos, G-20 leaders will try to force banks to build bigger capital safety cushions, while avoiding a clash over bonuses.
       Nearly six months have passed since the last G-20 summit in London and the top world economies have since edged closer to agreeing new regulations to prevent or mitigate future bank failures, but some hard bargaining remains.
       Bonuses looked likely to be the hot issue, with European capitals seeking to force London and New York to cap the massive payouts they feel encourage excessive risk-taking. But signs of consensus have emerged ahead of the summit Thursday-Friday in the American city of Pittsburgh, with leaders anxious to avoid an embarrassing row on the issue - a highly symbolic one for angry taxpayers.
       The US Federal Reserve agreed to tie compensation more closely to risk and to defer payments, while French President Nicolas Sarkozy appears to have stepped back from his earlier demand for mandatory caps.
       A deal therefore looks possible on bonuses and checking bankers' enormous salaries, but G-20 chiefs are keen to reach a wider accord on a package of measures to strengthen banks. On the table will be recommendations from the "Basel Committee on Banking Supervision" aimed at drawing lessons from the collapse of Lehman and the crises that hit European groups Fortis and Dexia and Iceland's Kaupthing.
       The committee, representing central bankers and regulators from leading G-20 states and other nations, wants banks to simplify their structures to make it easier to wind down their international operations in the event of a crisis.
       These "Basel II measures" have been welcomed by European governments, which would now like to see the G-20 as a whole adopt them as the foundations of a new, more stable international financial system.
       Washington, however, would like to move past Basel and - within three years - strike a broader deal to increase the amount of capital each bank needs to hold as a back-up in case its liabilities threaten to overwhelm it. US Treasury Secretary Timothy Geithner came to a meeting of G-20 finance ministers in London this month to urge "greater urgency" in making banks increase their capital reserves as a buffer against hard times.
       France and Germany, among others, believe Basel II goes for enough, and are resistant to the idea of renegotiating minimum capital levels, fearing that US banks - which thye see as having lax accountancy standards - will benefit.
       Part of the US plan would be for banks to hold fewer assets in complex securities, a mixture of debt and equity, and more in liquid assets. Such a rule would hit European banks harder than American ones.
       The subject "obsesses the Americans", according to one source involved in the pre-summit negotiations, and some observers predict it will become the main sticking point.
       "If the way the rules are applied is such that it puts European institutions at a disadvantage, it won't be acceptable," wanred Thomas Philippon, a French professor at the Stern Business School in New York.
       While differences remain on bonuses and bank liquidity, there are other areas on which the G-20 leaders are closer to agreement.
       They could approve new rules on leverage, a bank's ratio of capital to liabilities, and the need for so-called "living wills", plans to allow dead banks to continue trading while their partners disentangle their business.
       Basel II would also ensure banks make more detailed disclosures of their exposure to complex products such as asset-backed securities, and seek means to discourage them from becoming too big or too complex to be allowed to fail.