Thaindian News

Toronto, June 28 (DPA) The world’s 20 most powerful developed and developing economies at a summit Sunday promised to slash their budget deficits in a manner that fosters growth.
The promise of “growth-friendly fiscal consolidation” for rich countries marked a key compromise between the United States, which has pushed for more public spending, and Europe, which has already announced austerity measures in the wake of Greece’s debt crisis.

Wealthy countries also agreed to halve their budget deficits by 2013 and committed to “stabilise” their level of government debt by 2016 - two targets seen as a victory for the European Union.

“To be honest, it’s more than I had expected, because it’s very specific and was accepted by all the industrial nations. I think that that is a success,” German Chancellor Angela Merkel said.

The US-EU row had threatened to overshadow the Group of 20 (G20) summit in Toronto this weekend, but leaders agreed in the end that a careful balance was necessary between spending and budget cuts in order to keep a fragile economic recovery alive.

Keys to the economic recovery were “following through on fiscal stimulus and communicating ‘growth friendly’ fiscal consolidation plans in advanced countries that will be implemented going forward”, the final summit statement said.

The G20 also agreed that countries with large trade surpluses, such as China, should do more to boost consumption.

“Surplus economies will undertake reforms to reduce their reliance on external demand and focus more on domestic sources of growth,” the summit statement reads.

While no countries were mentioned by name, diplomats said that the clause was directed most strongly at China, which has run up a huge trade surplus on its path to becoming the world’s manufacturing hub.

Chinese President Hu Jintao said he was “soberly aware” of the need to rebalance the global economy, but warned it would take time.

“It cannot be done overnight. We must make persistent efforts to push forward this process,” Hu said, according to the Chinese state news agency Xinhua.

The G20 also agreed to extend a ban on protectionism until at least 2013. World powers initially adopted the ban at the first-ever G20 summit in Washington in November 2008, as the world financial crisis bit deep.

The leaders pushed back broader questions over financial regulatory reform and over the leadership of the World Bank and International Monetary Fund to the G20’s next summit in November.

Europe did not find support for a G20-wide levy on banks, or a tax on international financial transactions, to curb risk-taking in the financial sector in the wake of the 2008 credit crisis.

European countries and the US are keen to make their banks pay for the colossal state rescue packages doled out over the last year and a half. But Canada and developing states, whose banking sectors were less hard hit by the crisis, oppose calls for a G20-wide levy, fearing it would harm their financial industries.

Leaders at a dinner Saturday reached compromise by agreeing that those states which want to go ahead with bank levies can do so, but that states which do not want to do not have to.

“We welcome that our partners agreed to make the financial sector participate in the costs of repair, resolution and prevention and recognised the bank levy as a useful instrument,” European Commission President Jose Manuel Barroso said.