Toronto, June 27 (DPA) Leaders of the world’s 20 leading economies arrived Saturday in Canada, aiming to smooth over differences on financial regulation and how to keep the global economic recovery afloat.
Major developing economies including China, India, Brazil and South Africa joined a three-day gathering that began Friday with the Group of Eight (G8) meeting of wealthy nations, about 220 km north of Toronto in Huntsville.
Outside a sealed-off convention centre in the heart of Toronto, there was sporadic violence as at least 10,000 protesters clashed with an estimated 12,000 Canadian police and security forces.
Inside, the US and European Union were working to ease tensions over the direction of government spending, agreeing to the need for budget cuts without harming a fragile recovery in their economies.
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.
German Chancellor Angela Merkel said all sides agreed that exiting from stimulus programmes was critical to curb budget deficits, though there were ‘differing opinions on the speed’ of such exit plans.
US Secretary Timothy Geithner also sounded a conciliatory tone. ‘We have to find the right balance’ between public spending and budget cuts, as countries were recovering from last year’s economic recession at differing speeds.
Leaked drafts of a G20 summit statement due out Sunday indicated that the bloc 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.
‘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,’ the drafts said.
The leaders will also be discussing how to balance the global recovery over the long term, with the US pressing export-oriented countries 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.
The G20 draft statement welcomed China’s announcement and commits to ‘greater exchange-rate flexibility in key emerging markets’ over the coming years.
In a nod to the growing power of developing countries, the G20 is likely to end the 60-year-old arrangement by which an American heads the World Bank and a European leads the IMF.
The leaders of the G20 ‘agree that the heads and senior leadership of the international financial institutions should be appointed without regard to candidate nationality,’ the draft statement read.
G20 leaders still have to approve the text but are not expected to change it, according to diplomats.
They are not, however, expected to back EU calls for a worldwide levy on banks or a tax on financial transactions to curb risk-taking, Merkel acknowledged.
US President Barack Obama Saturday touted an agreement in Congress on overhauling financial regulation and his own plans for a levy on US banks. But Obama has not supported pushing such a levy on other G20 members, nor has he backed EU calls for a separate tax on financial transactions.
