G-20 leaders agree to cut deficits, not stimulus

V S Chandrasekar
Toronto, Jun 28 (PTI) Leaders of the G-20 group of
nations on Monday decided against immediate withdrawal of
economic stimulus, strongly pushed for by India, to preserve
the "fragile" global recovery, while agreeing that countries
should themselves decide on the contentious financial levies.
Meeting against the backdrop of Eurozone crisis arising
from government debts, which was compounded by the 2008
financial crisis, the Summit struck a balance by allowing
advanced economies to adopt fiscal plans to at least halve
deficits by 2013 and gradual unwinding of stimulus.
It will also help stabilise or reduce government debt-to-
GDP ratio.
Reflecting India's concerns, articulated by Prime
Minister Manmohan Singh that any immediate exit from stimulus
could lead to double-dip depression, the Toronto Declaration
said: "To sustain recovery, we need to follow through on
delivering existing stimulus plans, while working to create
the conditions for robust private demand.
"At the same time, recent events highlight the importance
of sustainable public finances and the need for our countries
to put in place credible, properly phased and growth-friendly
plans to deliver fiscal sustainability, differentiated for and
tailored to national circumstances."
India itself has initiated gradual rollback of stimulus
unveiled in the wake of the 2008 crisis triggered by the fall
of large US banks, but any sudden withdrawal of stimulus by
developed nations would hit exports of developing nations.
"Those countries with serious fiscal challenges need to
accelerate the Pace of consolidation. This should be combined
with efforts to rebalance global demand to help ensure global
growth continues on a sustainable path," the Declaration said.
While European majors like France, Germany and Britain
campaign for immediate cut back in spending to rein deficits,
an euphemism for exit from the stimulus, the US and countries
like India opposed such a quick termination saying there was
still need for a stable recovery.
The other major contentious issue was the proposal for a
bank tax to serve as a bulwark against future crisis of the
type that triggered collapse of the financial institutions in
2008.
The Summit adopted a flexible approach leaving it to the
individual countries to chose their path.
"We agree the range of approaches would follow these
principles: protect taxpayers; reduce risk from financial
systems; take into account individual countries circumstances
and options and help promote a level playing field," the G20
document said.
While countries like Britain, which has already levied a
tax, France and Germany campaigned for such a tax, nations
like India have reservations.
India pointed out that its banking institutions were
conservative by nature and followed healthy norms that
prevented any crisis in the country in 2008. MORE PTI VSC
MRD


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