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World Leaders at G-20 Vow to Trim Deficits

Source: AP

Posted on 28 Jun 2010

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Wary of slamming on the stimulus brakes too quickly but shaken by the European debt crisis, world leaders pledged Sunday to slash government deficits in the most industrialized nations in half by 2013, with wiggle room to meet the goal.

They generally sided with cutting spending and raising taxes, despite warnings from President Obama that too much austerity too quickly could choke off the global recovery.

"Serious challenges remain," they cautioned in a closing statement. "While growth is returning, the recovery is uneven and fragile, unemployment in many countries remains at unacceptable levels, and the social impact of the crisis is still widely felt," according to the document from the Group of 20 major industrial and developing nations.

Summit participants navigated a careful course between Obama, with his emphasis on growth, and fellow leaders such as German Chancellor Angela Merkel who advocated spending cuts and even tax increases.

"Advanced economies have committed to fiscal plans that will at least halve deficits by 2013 and stabilize or reduce government debt-to-GDP ratios by 2016," according to the statement. The gross domestic product (GDP) measures the value of all goods and services, and is considered the best gauge of economic health.

At the same time, the statement incorporated Obama's cautions against pulling back government supports too quickly. "To sustain recovery, we need to follow through on delivering existing stimulus plans, while working to create the conditions for robust private demand," it said.

A White House statement said the G-20's Toronto agreement carries through with existing stimulus programs while recognizing that deficit-reduction "needs to be calibrated ... and tailored to national circumstances."

The G-20 document came at the end of three days of economic summitry.