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 the 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 the Prime Minister, Dr 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 in 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. — PTI