LEADERS of the world’s largest economies attempted to display a united front last night, agreeing to cut government borrowing while stimulating growth after a weekend of tense talks in Toronto.
The Group of 20 communiqué agreed new targets for reducing deficits and sovereign debt, but America’s fear that fiscal tightening in Europe could derail the global recovery was also put forward.
And most of the questions surrounding tougher capital and liquidity requirements for banks were delayed until November’s summit in Seoul, effectively kicking the issue into the long grass while leaders work out their differences.
Government officials hailed the agreement as an endorsement of British fiscal policy, pointing to a commitment to “at least halve deficits by 2013 and stabilise or reduce government debt-to-GDP ratios by 2016”.
“Those with serious fiscal challenges need to accelerate the pace of consolidation,” the G20 said.
An aide travelling with chancellor George Osborne said: “This clearly welcomes those of us that want to accelerate the pace of fiscal consolidation. Thanks to our Budget, we’re doing that.”
However, the communiqué did little more than endorse the existing deficit reduction targets of all 20 nations, with the sole exception of Japan, which secured a statement acknowledging its intention to cut public borrowing more slowly.
And the final agreement contained a pointed statement reflecting the views of US President Barack Obama.
“There is a risk that synchronised fiscal adjustment across several major economies could adversely impact the recovery,” the communiqué read.
Although the leaders agreed on the need to introduce tough new capital and liquidity standards for banks, they opted to wait until the November summit in Seoul before thrashing out the details, such as what kind of assets will count as a capital cushion.
The G20 said any future capital and liquidity regime must “enable banks to withstand – without extraordinary government support – stresses of a magnitude associated with the recent fiscal crisis”.
An aide to the chancellor said Britain had adopted a “hawkish” stance in talks on financial reform, scotching suggestions that Osborne was trying to delay the introduction of new capital requirements amid fears they could curtail bank lending.