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Avoiding future crises The G20 leaders' meeting is also a natural platform to discuss the precautions that can be taken to avoid experiencing a similar crisis again. Trying to come up with a unified global financial regulatory environment will not work. Countries have different financial structures, needs and preferences. It would be best to avoid wasting time on a unified global framework. There are, however, some common lessons to be drawn.

Making international finance safe for the world economy not the other way around: What should the G20 communiqu say? G20 leaders should unite against unilateral actions that could tip the world into a vicious cycle that deepens the global recession. This should include: (i) coordinated fiscal expansions that include consumption-expanding measures by nations with large trade surpluses; (ii) commitment to abstain from protectionist measures; and (iii) commitment to expand funding of the IMF's Short-Term Lending Facility as needed. Finally, leaders should establish a high-level working group to design new 'traffic rules' for international finance. The G20 meeting takes place none too soon. But there is a danger that the leaders will spend too much time on grandiose ideas and not enough on containing the immediate crisis. There will be plenty of time in months to come to discuss a new Bretton Woods or a new regime of global regulation for finance. The immediate challenge is

to unite against unilateral actions that could create a vicious cycle and drag the world economy into an even deeper recession. Some suggestions for the G20 on November 15 th

G20 leaders should better coordinate their crisis 'firefighting' efforts including recapitalisations, lending guarantees, fiscal expansions, and toxic-asset valuations. They should also set in motion institutional reforms: (i) establishing a new G7/8 (US, EU, Japan, China, India, Brazil, Saudi Arabia and possibly Russia or South Africa) with the IMF as its secretariat; (ii) boosting IMF lending capacity, and; (iii) creating a uniform global regulatory framework for rating agencies and for large, highly-leveraged institutions with significant cross-border activities. The leaders of the G20 nations should consider two quite separate classes of decisions: putting out the fires, and adjusting global institutions. Fire-fighting measures Actions to be considered include: 1) Treasury guarantees for cross-border interbank lending, or, equivalently, central banks acting as universal counterparty of last resort in unsecured interbank transactions, including cross-border unsecured interbank lending and borrowing. 2) Mandatory recapitalisation of banks to a uniform international standard well in excess of the Basel II ratios. Governments should tell banks in their jurisdictions to raise their tier one capital ratios to, say, 11% by a certain date. If the shortfall cannot be made up by the deadline from private sources, the state will inject the balance, either in the form of ordinary equity or through convertible preference shares.