G-20 leaders focus on global recovery, banker pay

Turning from outright fear to cautious optimism, world leaders descended on the comeback city of Pittsburgh Thursday to debate how to nurture a recovering but still-wobbly global economy. The leaders appeared to be nearing agreement on one of the more contentious issues, restricting bankers' compensation.

Nerves are still on edge, but this summit of the world's 20 leading economies seems free of the crisis atmosphere that hung over the past two.

It was less calm on the streets, where police threw canisters of pepper spray and smoke at demonstrators after marchers responded to calls to disperse by rolling trash bins and throwing rocks.

A year after the financial meltdown began, the leaders had a panic-free agenda for an opening dinner, to be followed by a full day of talks. They'll be taking stock of the overall world economy, deciding whether to curb bankers' pay, setting universal rules for bank reserves and plotting an exit strategy from trillions in stimulus spending. The leaders will also grapple with next steps in combating global warming.

On the pay issue, Europeans in particular pressed for strict limits on salaries and bonuses for executives of financial institutions to keep them from being rewarded for the risky practices that contributed to the financial crisis.

"Europeans are horrified by banks, some reliant on taxpayers' money, once again paying exorbitant bonuses," said European Commission President Jose Manuel Barroso. Insisting "this is not a witch-hunt against bankers," Barroso said the EU was urging G-20 partners to stop the pay practice, "building on measures already taken in Europe and elsewhere."

The U.S. favors some restrictions but wants them linked to the health of the companies involved and does not want numerical limits as do leaders of Germany and France. The leaders seemed to be moving toward a middle-ground solution.

British Prime Minister Gordon Brown, speaking with reporters in New York before heading to Pittsburgh, said he hoped the group would agree to a new compact on jobs and growth. He warned, as President Barack Obama has, that nations should not move to quickly to end low-interest rates and stimulus spending packages.

"The recession is not automatically over," Brown said.

Brown said he hoped the G-20 would eventually replace the older Group of Eight major industrial democracies as the world's "forum of international cooperation." It includes many fast-growing economies, including China, India and Brazil, that are not among the original eight: the U.S., Japan, Britain, Germany, France, Italy, Canada and Russia.

Obama, who arrived from U.N. meetings in New York at mid-afternoon Thursday, chose Pittsburgh as the summit site because the formerly struggling Rust Belt city has transformed itself economically into a rebounding, environmentally conscious community with a diversified economy.

It is the third time within a year that the G-20 leaders have met to deal with the global financial meltdown.

The atmosphere is a lot more relaxed than at the fear-driven sessions in Washington last November and in London in April. Still, the global recovery remains fragile, with many big financial institutions under strain.

Obama is perhaps under more pressure now than he was at the April session, his first venture on the world stage. At that meeting he got points, analysts suggested, just for not being George W. Bush, who was widely disliked overseas, especially in European countries.

Summit partners are in basic agreement on a joint strategy to encourage big exporting countries like China, Japan and Germany to shift their economies more toward domestic spending, and to encourage more savings and fiscal discipline the United States. Ahead of the Pittsburgh gathering, Obama challenged world leaders at the United Nations to overcome an "almost reflexive anti-Americanism" while at the same time viewing U.S. consumers as a market of last resort.

But differences remained on tactics, including how quickly to move away from full-bore stimulation policies.

Washington wants the group to agree to a "framework for sustainable and balanced growth" that could include monitoring by an international group such as the International Monetary Fund that could detect policies that could lead to global imbalances.

Obama argues that the global economy cannot continually rely on huge borrowing and spending by Americans and massive exports by countries such as China.

But there remained disputes over details.

German Chancellor Angela Merkel said Friday that G-20 partners should not focus on stimulating economic growth at the expense of earlier pledges to reform global financial markets.

"We must not search for substitute topics and, beyond that, forget financial market regulation," Merkel told reporters in Berlin before leaving for Pittsburgh. Merkel said the countries should follow through on initiatives outlined at the earlier meetings in Washington and London to establish regulations and policies that would promote sustainable growth.

China, meanwhile, was pushing for greater voting rights in the IMF, which could dilute the influence now held by European countries.

The two-day summit was to end Friday with a joint communique likely to paper over many remaining disagreements.

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Associated Press writers Pan Pylas and Daniel Lovering in Pittsburgh and contributed to this report.