G20 looking for deal on cutting deficits by 2013

TORONTO, June 27: G20 leaders on Sunday closed in on a deal to slash national deficits within three years, aiming to narrow divisions among world powers on how best to nurture a fragile global economic recovery.

The heads of the world’s major industrialised powers agreed to what they dubbed “growth-friendly deficit reduction” proposals, to be applied on a country-by-country basis, bowing to concerns from emerging nations.

Canadian Prime Minister Stephen Harper told his G20 counterparts there was a “tightrope that we must walk to sustain recovery,” adding “it is imperative we follow through on existing stimulus plans”.

“But, at the same time, advanced countries must send a clear message that as our stimulus plans expire, we will focus on getting our fiscal houses in order,” he insisted.

A draft of the final G20 communique obtained by AFP stressed “the importance of sustainable public finances” by halving deficits by 2013. The leaders promise to put in place “plans to deliver fiscal sustainability, differentiated for and tailored to national circumstances,” it added.

The deal will mark a minor triumph for European leaders, led by German Chancellor Angela Merkel, who have pushed to rein in ballooning debt despite fears from the United States that this could stifle fledgling growth.

Merkel stressed, however, that the deal, which also includes a plan for nations to stabilise or reduce government debt-to-GDP ratios by 2016, would only apply to the most developed industrialised nations.

“This is an important common goal that will lead to sustainable growth,” she told reporters.

“We as Europeans can say that our path has found support.

“The timetable to cut deficits in half by 2013 is clearly an exit strategy,” Merkel continued, adding it was a “very ambitious” plan reached after discussions with the United States.

Signs had emerged on Saturday night at the start of a two-day G20 summit in downtown Toronto that the United States, the world’s top economy saddled with a huge 1.3-trillion-dollar deficit, was prepared to go along with the plan.—AFP

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