G20 agrees to deal

London - The world's biggest economic powers meeting at the G20 Summit in London on Thursday agreed to a deal making available more than $1 trillion in additional funds for leading international financial institutions, and laid the groundwork for a recovery of the global economy.

After more than seven hours of wrangling over how to ward off the global recession, the Group of 20 (G20) of the world's most advanced and emerging economies agreed to close off gaps in the regulatory system and to bring market rules into line with the changes unleashed by fast-paced globalisation.

"We will do what is necessary to restore growth" said G20 host and British Prime Minister Gordon Brown ending what had been a tough round of negotiations on how to haul the world economy out of what is the biggest economic downturn since World War II.

Agreeing to an overhaul of the financial system helped to paper over differences that emerged at the summit, with the G20 leaders stepping back from announcing additional fiscal measures to spur global growth in the face of stiff opposition from France and Germany.

The G20 leaders agreed to give the International Monetary Fund (IMF) more financial firepower, raising the organisation's resources by $500bn to $750bn to better help developing countries engulfed by economic crises.

The Group of 20 also ordered the IMF to sell billions of dollars of gold reserves to help the world's poor countries

The G20 leaders also agreed to a $250bn plan to shore up global trade with the Paris-based Organisation for Economic Cooperation and Development (OECD) warning on the eve of the summit that international trade was in freefall as the recession gains momentum.

Another $100bn is also to be made available to the World Bank with Brown saying measures agreed to the summit would help prevent a crisis like the current one from happening again and prevent the loss of jobs.

Emerging economies represented at the G20, such as China, have been pressing for a makeover of the world's top financial institutions as part of an effort to reshape the global financial system and to loosen the grip of the US and other advanced nations on bodies such as the IMF.

While the leaders were locked away in London's vast trade centre in the city's docklands considering how to overhaul the financial system, noisy but good-natured anti-capitalist protests were taking place outside the building.

Divisions within the G20 had emerged in the run-up to the London summit with both Germany and France insisting that the meeting needed to focus on reforming global markets instead of more fiscal stimulus measures to head off the economic downturn.

French President Nicolas Sarkozy and German Chancellor Angela Merkel had been concerned that the summit's final statement did not give enough emphasis to the need for sweeping changes to the financial system.

But the scale of the changes agreed to in London means that the summit represents only a step along the path to an overhaul of the global financial system with Brown saying another meeting was already being planned for later in the year.

"We have begun the process by which (the crisis) will be solved," said Brown.

Thursday's meeting represents only the second time that the G20 leaders have met since the organisation was formed two decades ago.

While financial markets chalked up rises as the leaders were meeting, those attending the summit have also received a reminder of the grim state of the world economy with figures released this week showing the recession tightening its grip on Japan and Europe.

Comprising South Africa, as well as Britain, the United States, Germany and France as well as India, China and Brazil, the G20 represents about 85% of world economic activity.

Thursday's summit comes about six months after the G20 leaders gathered in Washington for their first meeting when they laid down the markers for sweeping market reform amid fears about the prospects of imploding global economic growth.

As well the leaders signed off on a crack down on hedge funds and tax havens.

They also agreed that new accounting measures were necessary and to strengthen global financial market supervision.

- Sapa-dpa