By DPA,
Toronto : The leaders of the world’s 20 most powerful developed and developing economies (G20) looked to be heading for agreement on how to strike a balance between cutting their budget deficits and boosting growth, at a summit Saturday in Toronto.
Ahead of the summit, diplomats had said that the US, European Union and developing countries were at odds over whether to prioritise budget cuts or economic stimulus. But leaders at the summit looked set to end the controversy by calling for both.
“To sustain recovery, we need to follow through on delivering existing stimulus plans. … At the same time, recent events highlight the importance of sustainable public finances,” read the latest draft summit statement seen by DPA.
Leaders at the meeting said that there was no implicit contradiction in the statement.
“We’re aiming at the same target, which is world growth and stability, but … those countries that have big deficit problems like ours have to take action in order to keep that level of confidence in the economy, which is absolutely vital to growth,” said
Britain’s new premier, David Cameron.
Many EU countries have announced tough austerity measures in the wake of a debt crisis in Greece, amid fears that it could spread to other eurozone members. The US is mulling more stimulus for its own economy and worries that the EU’s budget cuts could choke off the global recovery.
But after talks with the leaders of developed states in the Group of Eight (G8) Friday and Saturday morning, German Chancellor Angela Merkel said all agreed that exiting from stimulus programmes was critical to curb budget deficits, though there were differing opinions on the speed.
US President Barack Obama gave a similar analysis.
“There are going to be differentiated responses … because of our different positions, but we are aiming at the same direction, which is long-term sustainable growth that puts people to work,” he said.
The drafts indicated that the G20 is likely to call for fiscal stimulus to be completed this year “where appropriate”.
From 2011 on, the talk is of “growth-friendly fiscal consolidation”, with budget deficits to be halved by 2013 and government debt to be “stabilised” by 2016.
The head of the EU’s executive, European Commission President Jose Manuel Barroso, said after the G8 meeting that he expected those timelines to meet with G20 approval.
The statement “has not yet been (approved): it was the work of our Sherpas (top negotiators), but so far it has been supported by all participants, so we expect it to be approved tomorrow”, he said.
Brazilian Finance Minister Guido Mantega warned that the aim of halving deficits by 2013 was “very draconian, a little exaggerated”.
“We know the remedies,” he said. “Now it’s a matter of gauging and fine-tuning the dosage of this medication. If we do the right thing at the right dosage, we’ll heal the patient. If you go too far, you kill it.”
Leaders were set to discuss how to balance the global recovery over the long term, with the US pressing export-oriented economies like Germany, China and Japan to boost domestic consumption.
China, hoping to ease complaints over its massive trade surplus with Western nations, announced ahead of the summit that it would allow its yuan currency to begin appreciating, a move the draft welcomed.
“We are confronted with the challenges of promoting the full recovery of the world economy,” Chinese President Hu Jintao said. “We need to continue to follow the spirit of staying the same course and uniting together.”
Outside the meeting, there was sporadic violence as at least 10,000 protesters clashed with an estimated 12,000 Canadian police and security forces.
Inside, tensions rose for a different reason, as G20 members the US and South Korea faced off in the football World Cup against non-members Ghana and Uruguay.
“It’s nerve-wracking,” Obama said as he watched the final minutes of the game, in between meetings with world leaders.
The US and South Korea both lost their matches.