G-20 leaders pledge new more balanced global growth model to avoid another financial meltdown

Leaders agree on having G-20 as key forum for global economic cooperation

President Obama: Global financial crisis almost ended

U.S. President prefers diplomacy to deal with Iran, not ruling out military option

World leaders took credit Friday for pulling the economy "back from the brink," and promised a new world order of tighter financial regulation and more inclusive global governance to protect the world from future meltdowns.

The gathering of the world's 20 top economies cautioned that the recovery remained fragile and agreed to keep stimulus plans, which include government spending and low interest rates, in place in their respective countries.

Turning from the crisis-management of previous summits, the Group of 20 leaders pledged to set up more rigorous financial rules that would cut down on some of the risky behavior and excesses that have been blamed for rocking the global economy. And they vowed better coordination over economic policies.

"Going forward, we cannot tolerate the same old boom-and-bust economy of the past," President Barack Obama said, speaking as the summit in Pittsburgh ended. "We can't grow complacent. We can't wait for a crisis to cooperate."

Obama had pressed for keeping the stimulus plans just such a course and praised the group's decision.

"Our coordinated stimulus plans played an indispensable role in averting catastrophe. Now we must make sure that when growth returns, jobs do, too," he said at a wrap-up news conference.

Obama said actions taken so far "brought the global economy back from the brink."

Reflecting the shift in the world's balance of power to Asia and Latin America, they made the G-20 — which includes such emergency economies as China, Brazil and India — the lead group for tackling international economic issues in the future, eclipsing the older, Western-dominated Group of Eight.

"The old system of international economic cooperation is over. The new system, as of today, has begun," said British Prime Minister Gordon Brown.

"It's clear that the G-8 without the G-20, without the remaining 12 countries, is today incapable of deciding all the tasks before the world economy," Russian President Dmitry Medvedev said.

They agreed to require members to subject their economic policies to the scrutiny of a peer review process that would determine whether they were "collectively consistent" with sustainable global growth. They promised tighter and more coordinated financial regulation.

However, the G-20 pledges lacked on details, and did not say, for instance, how the proposed peer review process would be enforced.

In the first international summit hosted by Obama, the G-20 turned on greedy bankers, agreeing on measure to curbs their bonuses in a bid to encourage more responsible behavior.

According to the new agreement, bankers would only get part of their bonuses upfront, while the rest would be dependent on the long-term financial performance of the firm.

"There was unanimity around the table that the errors of the past won't happen again," French President Nicolas Sarkozy said. "I am very satisfied by what we decided."

EU leaders had called for links between bankers' pay and the companies' long-term performance and have sought to end bonuses. Sarkozy in particular has lobbied for better financial regulation, warning that the world risked another speculative bubble "which when it bursts would put our economies on the edge of the abyss."

Leaders also agreed to make banks increase their capital buffers when the economy has recovered enough to allow them to put money aside to cushion against future downturns — a measure pushed by the United States. Europeans worried about being at a disadvantage won a key concession by ensuring that differences in accounting standards and the extent of the bank's risky behaviors be considered when determining the size of the buffer.

And, repeating pledges from G-20 summits in November and April, when financial panic was rampant, they vowed anew to "reject protectionism in all its forms."

They failed to mention that previous pledges to avoid protectionism had been ignored by nearly all 20 members.

Summit leaders also agreed to a bid proposed by Obama to reduce government subsidies for fossil fuels such as oil and coal linked to global warming. If fully implemented, the move would phase out $300 billion in global subsidies, the U.S. president said.

"All nations have a responsibility to face this challenge," Obama said.

The final statement also tackled the issue of whether China should gain voting strength in the International Monetary Fund and the World Bank at the expense of European nations.

The final statement said voting powers in the IMF "should reflect the relative weights of its members in the world economy, which have changed substantially in view of the strong growth in dynamic emerging market and developing countries."

Now, developed industrialized nations wield about 57 percent of the voting rights in the IMF to about 43 percent for developing nations. The G-20 leaders called for shifting shares from developed powers to emerging ones by at least 5 percentage points. They called for a similar shift at the World Bank.

European countries, particularly France and Britain, have been resisting such changes, which would diminish their role.

The streets of Pittsburgh were generally calm, a day after police and protesters clashed. A few thousand demonstrators pledging nonviolence banged drums, danced and held signs advocating assorted causes. On Thursday, a march without a permit and other demonstrations ended with nearly 70 arrests. South Korean President Myung-bak said his country will chair the G-20 next year and will host the next summit in November 2010.

Backed by other world powers, President Barack Obama declared Friday that Iran is speeding down a path to confrontation and demanded that Tehran quickly "come clean" on all nuclear efforts and open a newly revealed secret site for close international inspection. He said he would not rule out military action if the Iranians refuse.

Obama joined the leaders of Britain and France in accusing the Islamic republic of clandestinely building an underground plant to make nuclear fuel that could be used to build an atomic bomb. Iranian officials acknowledged the facility but insisted it had been reported to nuclear authorities as required.

"Iran's action raised grave doubts" about its promise to use nuclear technology for peaceful purposes only, Obama told a news conference at the conclusion of a G-20 summit whose focus on world economic recovery was overshadowed by disclosure of the Iranian plant.

Obama said a telling moment could come next week when Iran meets with U.S. and other major nations to discuss the nuclear issue.

"Iran is on notice that when we meet with them on Oct. 1 they are going to have to come clean and they are going to have to make a choice" between international isolation and giving up any aspirations to becoming a nuclear power, he said. If they refuse to give ground, they will stay on "a path that is going to lead to confrontation."

In a dramatic, early morning announcement about the secret Iranian facility, Obama said, "Iran is breaking rules that all nations must follow. The size and configuration of this facility is inconsistent with a peaceful program."

Unbowed, Iranian President Mahmoud Ahmadinejad said his country had done nothing wrong and Obama would regret his accusations.

At a news conference in New York, Ahmadinejad said the plant wouldn't be operational for 18 months but sidestepped a question about whether Iran had sufficient enriched uranium to manufacture a nuclear weapon. Still, he said such armaments "are against humanity, they are inhumane," and he said anyone who pursues them "is retarded politically."

Later Friday on CNN's "Larry King Live," Ahmadinejad said Iran did inform international authorities about its program and questioned what exactly Obama found fault with.

"We exceeded our commitment to the agency based on the regulations, and so is Mr. Obama really questioning why we informed the agency," Ahmadinejad said, referring to the International Atomic Energy Agency.

The head of Iran's nuclear program suggested U.N. inspectors would be allowed to visit the site. Ali Akbar Salehi called the facility "a semi-industrial plant for enriching nuclear fuel" that is not yet complete, but he gave no other details, according to the state news agency IRNA.

The plant, near the holy city of Qom southwest of Tehran, would be about the right size to enrich enough uranium to produce one or two bombs a year, but inspectors must get inside to know what is actually going on, one U.S. official said.

At his Pittsburgh news conference, Obama appeared to hold out limited hope for the Oct. 1 meeting, which will be the first of its kind in more than a year. Iran has said its nuclear program should not be on the agenda.

"When we find that diplomacy does not work, we will be in a much stronger position to, for example, apply sanctions that have bite," Obama said. "That's not the preferred course of action. I would love nothing more than to see Iran choose the responsible path."

He said he was confident in the reliability of the intelligence information about Iran's secret nuclear facilities.

"This was the work product of three intelligence agencies, not just one," Obama said. "They checked over this work in a painstaking fashion."

Obama said he was especially pleased that Russia and China agreed with him that Iran must live up to its obligations under international rules on nuclear activities. The leaders of Britain and France joined Obama at his morning announcement.

Russian President Dmitry Medvedev, at his own news conference in Pittsburgh, urged Iran to cooperate and "demonstrate its good intentions" at the Oct. 1 meeting and in allowing inspections. "We call on Iran to show maximum cooperation with the IAEA on this issue," he said.

Beyond tougher economic sanctions, options for acting against Iran are limited and perilous.

Military action by the United States or an ally such as Israel could set off a dangerous chain of events in the Islamic world. In addition, Iran's facilities are spread around the country and well hidden, making an effective military response difficult.

Asked about the prospect of using military force to stop Iran from getting the bomb, Obama said, "With respect to the military, I've always said that we do not rule out any options when it comes to U.S. security interests, but I will also re-emphasize that my preferred course of action is to resolve this in a diplomatic fashion. It's up to the Iranians to respond."

Defense Secretary Robert Gates, speaking Friday on CNN's "State of the Union," said it would be a mistake to rule out military action, but he also said there was still room to pursue diplomacy.

"The reality is, there is no military option that does anything more than buy time," Gates said, adding that the U.S. believes Iran could have a nuclear weapons within one to three years. "And the only way you end up not having a nuclear-capable Iran is for the Iranian government to decide that their security is diminished by having those weapons, as opposed to strengthened."

Obama's European partners talked tough, too.

"We will not let this matter rest," said British Prime Minister Gordon Brown, who accused Iran of "serial deception."

French President Nicolas Sarkozy said Iran has until December to comply with demands for a fuller accounting of its program or face tough new sanctions.

On Capitol Hill, three senators — Democrat Evan Bayh of Indiana, Republican Jon Kyl of Arizona and Independent Joe Lieberman of Connecticut — issued a joint statement condemning Iran.

"Given Iran's consistent pattern of deceit, concealment and bad faith, the only way to force Iran to abandon its nuclear ambitions is to make absolutely clear to the regime in Tehran that its current course will carry catastrophic consequences," the senators said. "We must leave no doubt that we are prepared to do whatever it takes to stop Iran's nuclear breakout."

Iran had previously acknowledged having only the one uranium enrichment plant, under international monitoring, and had denied allegations of undeclared nuclear activities.

James Acton, a nuclear expert at the Carnegie Endowment for International Peace, said a consensus has developed that if Iran were to decide to manufacture nuclear weapons the key material probably would be produced in a clandestine facility.

"This should persuade any doubters that Iran's program is not for peaceful purposes," Acton said.