Pittsburgh, a city built on steel production, is showing its tough side as it hosts the G-20 summit. The 4,000 police officers eye anyone walking past the city center's cordoned-off streets with distrust. Military vehicles block the city's many prominent bridges, while security forces quickly use tear gas on the handful of demonstrators who are protesting for more action on climate change and against capitalism.

But the mood at the Phipps Conservatory, where the leaders of the G-20 nations dined on Thursday, the opening day of the summit, was likely more cheerful. According to sources close to the delegations, there was an atmosphere of "trust" and of team spirit on display on Thursday evening. The mood was so intimate, that the Western leaders apparently found time to initiate their Chinese colleagues into the peculiarities of coalition governments and multi-party political systems.

If there was one assured victor even before the G-20 had commenced, it was the format of the event itself. "We want to continue with this form in the long run," said sources from the German delegation. "There is agreement that the format has established itself over the course of the three summits that have been held so far."

According to the US media, US President Barack Obama will officially announce on Friday afternoon that the G-8 group of the world's leading industrialized nations will now be replaced by the Group of 20 nations, which includes emerging economies such as China, India and Brazil. The next meeting has already been scheduled to take place in Canada in 2010.

The unanimous verdict from the delegates even before the meeting is over is that the summit in Canada will build on the successes from Pittsburgh. "The results are better than we had expected," say German representatives. And US Treasury Secretary Timothy Geithner also pronounced his optimism, saying there was a "strong consensus on the basic framework and objectives." These would include higher capital requirements for banks, stronger regulation of hedge funds and derivatives and clearer rules for executive pay, he said.

Limiting Salaries

In the run-up to the summit there had been disagreements between the European and US delegations over the Pittsburgh agenda. But it seems both sides have now made concessions.

The Americans, in particular, seem to have come round on the issue of limiting salaries for bankers, something that lay close to European politicians' hearts. The US wanted to deal with the issue by increasing banks' capital requirements rather than through stricter limits. However, the Europeans envisage using new rules to prevent guaranteed bonus payments being paid out over years without being tied to results. In future they should be paid out in the form of shares in the company, rather than cash payments -- something that would increase recipients' interest in the company doing well. In addition, the level of variable remuneration should in future be tied more closely to companies' key data.

The new regulations would be overseen by the new Financial Stability Board, made up of experts from central banks and financial regulators, which was established at the previous G-20 summit in London. "It is happening very quickly," said one source close to the German delegation, adding that the European pressure had worked.

Global Imbalances

However the Europeans did not make the question of bonuses into the huge issue that some experts had feared they would. And they even seemed prepared to make concessions to the American negotiators -- such as being willing to look at the question of the imbalance between nations such as China and Germany, which have large export surpluses, on the one hand, and on consumer countries with huge trade deficits like the US, on the other.

Washington had repeatedly emphasized the issue in recent weeks, much to the displeasure of German politicians. They felt like they were being attacked for their export achievements and suspected that the issue was intended to distract attention from the bonuses debate. They also expressed doubts about the American argument that a country like Germany could boost the global economy through increased domestic demand. "To believe that 80 million Germans could compensate for all the global imbalances is just wishful thinking," one source said indignantly. However the Europeans are now apparently willing to talk about global imbalances "within a comprehensive framework" and under the coordination of the International Monetary Fund (IMF).

The debate about an "exit strategy" -- the withdrawal from the economic system of the billions-strong state-funded measures to battle the crisis -- was largely postponed, however. The G-20 nations appear to agree that this needs to happen -- but not too quickly. Companies should have time to adjust to the change, they feel, so that there are no "shock effects."

Equally as cautious were discussions on issues other than the reform of financial markets, issues that emerging economies in the G-20 are much more concerned with -- in particular the distribution of power in international organizations. Nevertheless, it looks like emerging economies' voting rights at the IMF will be boosted by five percentage points. But the number of seats at the Fund will not change for the time being, and -- unlike the last G-20 meeting in London -- this summit will not lead to any further significant increases in funding for the IMF.

No Progress on Climate Change

Three days before the German general election on Sept. 27, Germany's two highest representatives at the summit -- Chancellor Angela Merkel and Finance Minister Peer Steinbrück -- exuded harmony in their joint appearances, despite belonging to rival parties, the center-right Christian Democrats and the center-left Social Democrats respectively. They emphasized that they represent the interests of Germany, not their political parties, even in the final stretch of the election race.

Merkel even went as far as to mention Steinbrück's proposal for a tax on financial transactions  to the other G-20 members. The idea had not, however, made it onto the meeting's agenda and has received little international support -- even though Steinbrück emphasized yet again that such a tax could help to fund, for example, expensive measures to fight climate change.