copyright 2009, The Washington Post WASHINGTON -- The leaders of the 20 largest economies officially anointed themselves the steering committee of the global financial system on Friday and reached a series of agreements aimed at navigating the world out of recession and onto the path of recovery President Obama, hosting his first Group of 20 summit, managed to achieve most but not all of his top objectives, including getting member nations to agree to review one another's economic policies to ensure they do not provoke a repeat of the worst financial crisis since the Great Depression. 'Because our global economy is now fundamentally interconnected, we need to act together to make sure the recovery creates new jobs and industries while preventing the kind of imbalances and abuses that led us into this crisis,' President Obama said at a news conference at the close of the two-day meeting. The summit was the third gathering of G-20 leaders since the collapse of Lehman Brothers last year triggered a global economic free fall. Since then, early signs of recovery have emerged around the world, and in the weeks leading up to the summit, the G-20 leaders faced questions about whether it was time to tighten interest rates and withdraw hundreds of billions of dollars in stimulus spending. They arrived in Pittsburgh already in agreement that the global economy was still too fragile to warrant a pullback. 'A sense of normalcy should not lead to complacency,' the leaders said in a joint statement. 'The process of recovery and repair remains incomplete.' The global economy has become stable enough, however, for the leaders to turn their attention to preventing future financial crises. The United States and European nations were able to settle differences over how best to stem irresponsible risk-taking by financial companies. The United States had emphasized the need to raise the quality and quantity of capital that banks must hold to cover potential losses. The Europeans had stressed restrictions on bankers' pay, including hard limits. In the end, the leaders agreed to those principles -- but without the hard limits -- as well as better aligning executive compensation with long-term performance and more transparency for trading in complex securities known as derivatives. Obama was also able to get Europe and China to commit to avoid pursuing economic policies that fuel the huge global imbalances blamed by economists for helping spark the current crisis. Under the agreement, countries with large deficits such as the United States would promise to borrow less while major exporters such as China and Germany would pledge to stimulate domestic consumption. The members agreed to use the International Monetary Fund to help review their economic policies to make sure they do not generate harmful imbalances. While other G20 members signed off on the U.S. proposal, many remained skeptical of its effectiveness and its purpose. 'There remains considerable skepticism among many G-20 leaders from emerging markets that this may simply be a ruse by the U.S. to deflect attention from its massive budget deficit,' by casting the problem as a global one, said Eswar Prasad, a trade policy expert and professor at Cornell University. What made it easier to sign on is that countries that fail to adhere to the agreement face no penalties. Critics noted that similar arrangements have been tried before, with little impact on national decisions. But Edwin Truman, a fellow with the Peterson Institute for International Economics and a former Treasury official, said this latest attempt at rebalancing global growth is promising because it puts leaders on the record and potentially raises the political stakes for them if they fail to comply. The G-20 also agreed to make itself the principal forum for global economic issues, eclipsing the older, West-dominated G-8 and further institutionalizing the new economic order. The Obama administration sees increasing the clout of emerging economies in international institutions as essential to getting developing nations to play a bigger role on other issues such as climate change. To better reflect the growing role of China, Brazil and other emerging nations, the G-20 leaders also approved a reform of the governance structure of the IMF and World Bank. Summit participants agreed to increase developing nations' quota of representation shares by 5 percent at the IMF and 3 percent at the World Bank. Reforming the structure of those institutions is key to helping prevent future crisis, said Simon Johnson, a former IMF chief economist and Peterson Institute fellow who writes a weekly online column for The Washington Post. Countries such as China, South Korea and Japan began building huge reserves in the wake of the Asian financial crisis in the 1990s and their bad experiences with the IMF. 'They have to believe in the IMF so they don't build huge reserves,' Johnson said. The support of emerging economies turned out to be key in securing an unexpected victory for the Obama administration on phasing out subsidies for the consumption and production of fossil fuels. The United States and many other countries around the world provide financial aid -- in the form of both direct payments and tax breaks -- to help produce oil, natural gas and other fuels that produce carbon dioxide, which has contributed to rapid climate change over the past half-century. According to the Environmental Law Institute, the U.S. government provided $72 billion in subsidies to the fossil fuel industry between 2002 and 2008. Jake Schmidt, international climate policy director at the Natural Resources Defense Council, said that while the statement is 'not the firmest commitment' toward creating a low-carbon economy, 'it's an important down payment' on such a policy. U.S. oil and gas industry representatives predicted the agreement would impose a new burden on Americans. Jack Gerard, president of the American Petroleum Institute, said the administration and Congress 'now face many difficult choices if they choose to comply with the G-20 commitment to phase-out fossil fuel subsidies.' 'Does the president really think it wise to eliminate tax provisions that encourage investment in technology and exploration and development and would likely constrict future energy supplies, raise energy costs and kill jobs?' Gerard said in his statement. The agreement calls on energy and finance ministers from the G-20 to devise 'strategies and timeframes' for eliminating the subsidies and to report back at the next meeting. The leaders of countries including France, Britain, Japan and developing nations such as China and India were vague in describing how much money industrialized countries must provide to help vulnerable and major developing nations cut their emissions and respond to climate change impacts. Shin reported from Pittsburgh, and Eilperin reported from Washington. Staff writer Zachary Goldfarb contributed to this report. 