Finance leaders clashed today over how to stop banks plunging the world into another crisis, according to Reuters. While new International Monetary Fund forecasts obtained by Reuters showed the world economy looks finally on the mend, G20 policymakers gathered in London are divided on how to ensure any recovery lasts and bankers don't run riot with risk again. They all agree economic life-support packages have to stay in place for now, but a G7 source told Reuters France and Germany oppose a U.S. plan to get banks to hold more capital. The Europeans also want much tougher curbs on bankers' pay and France is pressing for strict limits. "Public opinion in most European countries, including at home, here in the UK and in the United States, has been flabbergasted, horrified by the amount of compensation paid," French Economy Minister Christine Lagarde said. U.S. Treasury Secretary Timothy Geithner has called for strengthened bank capital requirements aimed at curbing some of the risky lending practices blamed for the crisis. Lagarde said she could not see the point. British finance minister and meeting host Alistair Darling told Reuters he supported the U.S. plan but admitted there were differences between policymakers. He said it was more important that no country was complacent about the recovery despite signs the world economy is healing. The IMF now forecasts the world economy to shrink 1.3 percent in 2009, a shade less than its April forecast of a 1.4 percent contraction, and grow 2.9 percent in 2010, revised up from 2.5 percent previously. But policymakers are cautious about declaring victory yet, especially given most major economies are only expected to post sluggish growth next year, with Germany remaining in recession, while layoffs are set to increase. "People are at risk of saying the job's done, now we can throttle back," Darling told Reuters. "We've made those mistakes before -- most notably, in America, in the late 1930s, (they) called it wrong and got themselves back into a recession again."
