Pittsburgh, Pennsylvania - The Group of 20 (G20) bloc of nations was turned into the world's top economic decision-maker on Friday as leaders considered ways to keep a global economy recovery on track and implement far-reaching reforms of the financial sector. During a summit hosted by US President Barack Obama in Pittsburgh, the leaders offered emerging giants like China, India and Brazil a major victory by giving them a seat at the top table in future global economic talks.
Chinese President Hu Jintao said governments should "make full use of the G20 platform" to tackle the world's toughest economic problems and promote recovery.
Smaller blocks like the Group of Eight (G8) industrial nations will play a lesser role on the economy, though they will keep a major role in foreign security affairs.
The two-day G20 summit represents the third time the group's leaders have met since the world economy plunged into a crisis in September last year following the implosion of the US investment bank Lehman Brothers.
At their meeting in Pittsburgh, the G20 leaders also reviewed the state of the world economy and agreed to push forward in introducing tough financial reforms.
The goal was to prevent financial firms from taking the kinds of unnecessary risks that helped plunged the world into recession last September.
German Chancellor Angela Merkel, who faces an election on Sunday, said the deals made Friday should give people confidence that "such a crisis will never happen again."
The leaders were set to announce a compromise that would more closely link bank executive salaries to performance, with possible penalties for banks that don't comply with the new rules, Merkel said.
There was no agreement to cap salaries or bonuses, as had been suggested by European leaders.
Drawing on the lessons of the year's financial crisis, the leaders were also expected to pledge new international rules on capital standards for banks, in order to stop financial firms from holding too few funds to survive a downturn.
Countries that haven't adopted the Basel II rules on capital requirements, including the United States, will pledge to do so by 2011. The Basel II accord was agreed upon earlier this decade and has been in place in most European countries since 2007. The US is also pushing for the rules to be strengthened further in coming years.
The G20 leaders gathered for two negotiating sessions and a lunch on Friday. A communique was due by the late afternoon and Obama would sum up the day with a press conference.
Before the day's talks even began, leaders reached what the White House called an "historic agreement" to secure the G20's future as a place for discussions on the global economy.
The bloc shot to prominence last year as the world's worst recession in decades forced leaders to broaden their cooperation beyond just industrial nations.
The G20 countries together make up about 85 per cent of global economic output, and the decision to keep the bloc puts an end to the dominance of advanced economies on questions of global finance.
The Group of Seven (G7) has met annually for more than 30 years. It consists of the largest developed economies: Britain, Canada, France, Germany, Italy, Japan and the United States, and since the 1990s has usually met with Russia as the Group of Eight (G8).
Leaders said the G20 would become the "premier forum for their international economic cooperation." Leaders have long pledged to keep the G7 and G8 as a place to discuss security issues.
The summit comes amid signs that the global economy is recovering from its first recession since World War II. But despite calls for an "exit strategy," leaders were unlikely to call for a major pull back from government interventions in the economy just yet.
China's Hu, who along with Obama has been most aggressive in using public spending to revive growth, called for countries to maintain their stimulus measures to keep the recovery alive.
"All countries should keep up the intensity of their economic plans," Hu said.
The G20 talks were, however, overshadowed by Iran's admission that it had a second nuclear facility. Obama, British Prime Minister Gordon Brown and French President Nicolas Sarkozy appeared together Friday to condemn the development.
Obama called it "disturbing" and said the size of Iran's second nuclear plant was "inconsistent" with use for civilian power. US officials alleged its sole purpose was to give the Islamic state the option to produce material for atomic weapons.
More than 4,000 police have been mobilized for the Pittsburgh summit with the scattered protests with the opening of the meeting on Thursday held against the backdrop of scattered protests.
Meanwhile, European Union officials warned that little progress was being made on narrowing differences on climate change. EU Commission President Jose Manuel Barroso said Thursday that efforts to reach a new global climate treaty by a December summit in Copenhagen were in jeopardy.
