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Obama Urges G-20 Against Hasty Deficit Cuts

Wednesday, 23 Jun 2010 07:07 AM

President Barack Obama's top economic advisers are urging America's major economic allies not to sacrifice economic growth to efforts to trim budget deficits.

Treasury Secretary Timothy Geithner and Lawrence Summers, head of the president's National Economic Council, said the president will stress at upcoming global economic meetings the need for balanced growth and strong reform of the financial system.

The two advisers, writing in The Wall Street Journal, said that it will be important to make sure that economic stimulus is not withdrawn too quickly.

"We must demonstrate a commitment to reducing long-term deficits, but not at the price of short-term growth," Geithner and Summers wrote in the opinion piece, which was appearing Wednesday ahead of weekend talks in Canada of the leaders of the Group of 20 major industrial nations.

"Without growth now, deficits will rise further and undermine future growth," Geithner and Summers wrote.

The two advisers echoed points that Obama had made last week cautioning other G-20 countries that they needed to be careful and not withdraw stimulus spending too quickly.

The issue is shaping up to be one of the points of dispute at the discussions because a number of European countries, rattled by the debt troubles of Greece, have been moving to trim their own deficit spending.

The near-default of Greece sent stock markets plunging around the world in April and May in an eerie reminder of the financial crisis that gripped the world in the fall of 2008.

Markets have since stabilized, but only after European countries who share the euro currency with Greece joined with the International Monetary Fund to assemble a 110 billion euro bailout for Greece and an even larger 750 billion euro backstop in case the problems in Greece spread to other European nations.

In their opinion piece, Geithner and Summers voiced support for those financing packages but cautioned other countries from rushing to implement deficit-cutting moves of their own lest it further weaken the recovery.

"We must ensure that global demand is both strong and balanced," they wrote.

The issue is likely to generate debate among other G-20 nations. Canadian Prime Minister Stephen Harper, the host of this year's gathering, wrote his own letter to G-20 leaders urging them to adopt specific deficit-cutting targets.

And the leaders of Germany, France, Britain and Japan have all recently announced their own deficit-cutting programs.

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