Group of 20 countries pledged to be flexible in reining in deficits to protect growth as they craft fiscal plans before a leaders’ summit in St. Petersburg.
Officials meeting in Moscow this week pledged to implement fiscal strategies that will be flexible “to support economic growth and job creation,” according a statement issued after the two-day summit. Leaders will decide at the September summit in Russia’s second-biggest city whether those strategies, which have already been submitted, will be binding, an official from a G-20 country said on condition of not being identified because the talks weren’t public.
Divisions among the world’s richest nations have deepened in recent months over the pace of budget cutting, with the debate turning on whether austerity measures exacerbate slowdowns or help end them by boosting investor confidence. Global finance chiefs clashed over the issue at a meeting in May near London, where U.S. Treasury Secretary Jacob J. Lew pressed European policy makers to intensify efforts to revive their economies by reconsidering the pace of budget cuts and seeking ways to unfreeze credit markets.
Germany, along with Canada and the U.K., is seeking tougher language that would require medium-term budget targets and push the U.S. and Japan to follow through on previous commitments, the official said today. Germany in turn came under fire from the U.S. and South Korea, who pressed Europe to prioritize growth over debt-cutting measures.
The EU said in a planning document for the Moscow meeting that the “absence of an agreement on a credible medium-term fiscal consolidation plan in the U.S. continues to pose a downside risk to the global recovery.”
The U.S. “should make progress in addressing the medium- and long-term fiscal challenges it is facing as well as deal with the debt-ceiling issue,” according to the EU.
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