G20 summit: leaders agree to halve deficits by 2013

http://www.telegraph.co.uk/finance/financetopics/g20-summit/7858162/G20-summit-leaders-agree-to-halve-deficits-by-2013.html

G20 summit: leaders agree to halve deficits by 2013
Leaders at the G20 summit in Toronto have agreed to cut national budget deficits in half by 2013.
28 Jun 2010

Link to this video Heads of state also agreed new rules that would force British banks to boost their funds by £130 billion to reduce the risk of another Lehman Brothers-style collapse.

In a reversal from the unity of the past three crisis-era Group of 20 summits, the leaders decided to adopt "differentiated and tailored" economic policies for each country.

"Our challenges are as diverse as our nations," US President Barack Obama said. "But together we represent some 85 per cent of the global economy, and we have forged a coordinated response to the worst global economic crisis of our time."

George Osborne hailed the G20 statement as a vindication of the coalition government's policy.

"I think the communique very explicitly recognises that countries in the G20 with serious fiscal challenges - and after all I am here representing the country with the largest deficit - need to accelerate the pace of consolidation," said the Chancellor.

"That language is reflected in the coalition agreement on which the British Government is formed. It has been delivered in the Budget we have presented earlier this week.

"I think people will have seen a change of tone at the G20, as people have understood the impact of the sovereign debt crisis and the necessity of countries to prove not just to international investors but to their own domestic populations that they have got serious, credible plans to live within their means."

In a sign of how much work was involved to forge the G20 consensus, negotiators spent at least 45 hours drafting the summit's final communique.

In the document, the Group of 20 endorsed a flexible timeline for building up higher levels of capital and liquidity, giving some breathing room to banks that say they are still struggling after the global recession.

Stephen Harper, the Canadian prime minister, said the group's richest members should halve their deficits within three years, a timeline that every major G20 country had already committed to before the summit.

The delay marks a victory for banks and countries such as Japan, Germany and France, which said that the shift to stricter rules by 2012 would have imposed huge capital-raising burdens on banks and jeopardise lending and economic recovery.

However, the chief executive of Deutsche Bank warned that too much variance in the timelines could lead to an uneven playing field for banks.

Proposals for a global levy on banks have been dropped, Mr Harper said. Instead, that will be left to individual countries.

Mr Harper also said government debt, as a proportion of the economy, "should be at least stabilised or on a downward trend by 2016".

In a sign of how much work was involved to forge this G20 consensus, negotiators spent at least 45 hours drafting the summit's final communique, said Dominique Strauss-Kahn, head of the International Monetary Fund. Details of the transition timeline and on the new capital rules will be ready for the G20 November summit in Seoul.

Outside the summit, police clashed with large groups of protestors who smashed shop windows and torched police cars on the streets of Toronto. A total of 605 demonstrators were arrested.