The Group of 20 will become the forum for global economic management, giving rising powers such as China more clout, and will roll out tougher rules for banks by the end of 2012, a draft communique said on Friday.
Ensuring and sustaining economic recovery topped the agenda at a two-day Pittsburgh summit of the world's richest nations and emerging powers such as China, India and Brazil. Leaders sounded confident they had succeeded in arresting the worst recession in generations.
It worked, they declared in the draft communique obtained by Reuters. Our forceful response helped stop the dangerous, sharp decline in global activity and stabilize financial markets.
But they acknowledged much work was still needed to reform financial regulation and reshape global growth to make sure the economy emerges on a more stable footing.
The G20 countries, which account for 90 percent of the world's output, vowed to keep emergency economic supports in place until a recovery was secured, according to the draft communique.
Suggestions that any exit strategies from such measures would still be a way off caused the dollar to fall to a 7-1/2-month low beneath the key 90-yen level on Friday.
The leaders designated the G20 as the premier forum for international economic cooperation, supplanting the G7 and G8 institutions dominated by rich Western economies that diplomats said will now be forums for discussing geopolitical issues.
The communique is subject to change. The G20 leaders will issue the final version when they wind up their meeting late on Friday.
This movement to the G20 and away from the G7 is recognizing economic realities. You can't talk about the global economy without having the major dynamic emerging economies at the table, John Lipsky, the deputy managing director of the IMF, told Reuters Television.
Marco Aurelio Garcia, foreign policy adviser to Brazilian President Luiz Inacio Lula da Silva, said the G8 was not dead but it is clearly in its death agonies.
That is why we are going to have two G20 meetings next year, in Canada and in Korea, he added.
U.S. President Barack Obama's first G20 summit as host tested his ability to juggle domestic and foreign policy.
Disclosure of a second Iranian uranium enrichment plant gave Obama, with the leaders of Britain and France at his side, an opportunity to press for united action against Tehran over its disputed nuclear program.
In the draft communique, G20 leaders also agreed to reform the International Monetary Fund to give greater voting power to China and other big emerging economies.
Most of the rich world is still struggling with high unemployment, impaired banks, and heavy debt burdens that will probably limit spending power in the years to come, making it all the more important for emerging countries to help take up the economic slack.
Max Lawson, senior policy adviser at international aid group Oxfam, said the reforms amounted to tinkering around the edges and failed to fully redress IMF imbalances.
Unless it changes its rules to give poor countries a real say in the way it is run, the IMF will remain the world's rich country club, he said.
The G20 agreed to rein in financial industry excesses that triggered the credit crisis two years ago.
Tighter rules on how much capital banks must have to absorb losses should be ready by the end of 2010 and will be phased in during the following two years, the draft said.
The document also tackled the contentious issue of bankers' pay schemes, blamed for fostering a high-risk corporate culture that led to heavy losses and taxpayer-funded bailouts.
It suggested linking pay to long-term value creation, not excessive risk-taking.
The draft did not mention direct caps on pay, as proposed by some European leaders. French officials said the summit had not reached a final accord on executive pay.
The document said the G20 would try to secure a deal next year in long-running world trade talks. Similar pledges have been made at a number of international gatherings, so far without result.
While Wall Street welcomed the renewed commitment to keep the stimulus money flowing, some analysts were skeptical that the G20 would achieve much substantive change.
They are accomplishing all sorts of small things like pay guidelines on bank executives. On the really important things like increasing bank capital limits and limiting carbon emissions, we are just too far apart, said Christopher Low, chief economist at FTN Financial in New York.
In return for giving emerging economies greater say, the draft communique suggested, the G20 won their commitment to do their part in rebalancing the world economy.
That rebalancing act involves the debt-laden United States saving more and export powerhouse China consuming more.
The draft said G20 countries with either sustained, significant surpluses -- a description that fits China -- pledged to strengthen domestic sources of growth.
By the same token, countries with big deficits -- such as the United States -- pledged to support private savings.
But Chinese President Hu Jintao said the imbalance that the G20 ought to be worried about was the one between rich and poor countries.
Some rebalancing is already happening due to the recession. U.S. consumers, long viewed as the world's shoppers of last resort, have cut spending as household wealth has shrunk, while China is spending about $600 billion to stimulate its economy and make it less dependent on exports.
The draft also showed leaders endorsed an agreement on phasing out subsidies for fossil fuels to help combat global warming, but with no fixed date for the change.
The summit saw the protests that have become usual at such gatherings, as well as customary tight security.
More than 1,000 protesters gathered to march against capitalism and the summit agenda on Friday as businesses cleaned up from a night of skirmishes on Pittsburgh streets.
A small plane flew into restricted airspace over the city on Friday and was escorted to a nearby airport by two F-15 fighter jets, officials said. Authorities were investigating the incident.
(Reporting by Reuters G20 team; Additional reporting by Richard Leong in New York; Writing by Emily Kaiser; Editing by John O'Callaghan and Frances Kerry)