G-20 to say fiscal problems pose threat to recovery: draft+

TORONTO, June 24 Kyodo -
Leaders from the Group of 20 major economies are planning to say that emerging
fiscal problems are posing a serious threat to the nascent economic recovery
and long-term growth prospects when they wrap up their two-day summit meeting
Sunday in Toronto, according to G-20 draft documents obtained Wednesday.
While noting that their efforts to date have realized a gradual return to
growth, the leaders are set to agree that much work remains to be done.
''In particular, emerging fiscal challenges in many states are creating market
volatility, and could seriously threaten the recovery and weaken prospects for
long-term growth,'' a copy of the communique draft obtained by Kyodo News said.
The draft warned that the recovery is ''uneven and fragile, and unemployment
remains at unacceptable levels.''
Massive fiscal spending adopted after the 2008 global economic crisis in many
countries has deteriorated their fiscal positions.
The G-20 countries are aware that ballooning budget deficits and prolonged
government intervention in the private sector could hamper healthy economic
growth in the long run, but there are differences in positions among them on
how to push the recovery forward.
Amid rising concerns over sovereign risks, many European countries are keen to
implement austerity measures, while the United States and Japan are cautious
about withdrawing stimulus packages too drastically and are emphasizing the
importance of keeping a good balance between fiscal consolidation and growth.
One of the highlights of the upcoming summit is whether the major economies can
find common ground on the management of public finances.
Bank levies, reforms of international financial institutions, global imbalances
and trade are some other top agenda items to be taken up at the summit.
The draft said, ''Further actions are still required to address the underlying
causes of the global financial crisis, and promote more responsible and
transparent banking sectors.''
But it has no specifics of what kind of stance the G-20 leaders as a whole, for
example, would have on bank taxes, strongly advocated by European countries
that could recoup part of the huge public funds injected into banks to keep
them from collapsing during the financial crisis.
It is unlikely that the G-20 countries will reach a consensus on bank levies at
the Toronto summit, partly because countries such as Canada and Japan -- whose
banks have been less damaged during the crisis as they did not undertake many
excessive risk-taking deals -- are opposed to the taxes, according to officials
preparing for the summit.
As part of their efforts to fight protectionism, the leaders of advanced and
emerging heavyweights are planning to commit to refraining from raising new
barriers to investment or trade in goods and services until the end of 2013,
the draft said.
To reduce poverty and narrow the gap between rich and poor countries, the
leaders will agree to establish a new ad-hoc group on development, according to
the draft.
The working group will be in charge of elaborating on action plans for the
development agenda to be adopted at the subsequent G-20 summit in Seoul in
November.
The G-20, responsible for about 90 percent of global economic output, is formed
by the Group of Seven major countries -- Britain, Canada, France, Germany,
Italy, Japan and the United States -- plus key emerging countries, including
Brazil, China, India and Russia.
==Kyodo