Friday, 25 June 2010

G20: leaders assemble as divisions emerge on whether to cut or spend

The leaders of the world's biggest economies will assemble in Toronto this weekend for a G-20 summit, amid growing tensions on how best to head off a second global recession.

David Cameron arrives in Canada for Friday's G-8 summit and this weekend's G-20 summit.
David Cameron arrives in Canada for Friday's G-8 summit and this weekend's G-20 summit.
The G20 summit, which starts in the Canadian capital on Saturday, comes as the Obama administration insists that governments' policies must focus on bolstering the recovery, rather than immediately tackling deficits.
“We must demonstrate a commitment to reducing long-term deficits, but not at the price of short-term growth,” US Treasury Secretary Tim Geithner argued in an article in the Wall Street Journal. “Without growth now, deficits will rise further.”
By contrast, David Cameron arrives at his first major international summit days after laying out a Budgetthat put tackling Britain's record deficit at the heart of his new government's policy. Mr Cameron and his Chancellor, George Osborne, argue that a failure to reduce the deficit poses an even bigger threat to the recovery, as it will risk a Greek-style debt crisis.
The Prime Minister played down the tension with Obama, saying "this weekend isn’t about a row over fiscal policy. We all agree about the need for fiscal consolidation."
The policy headache facing governments isn't helped by the lack of consensus among experts over whether further stimulus or deficit reduction is what's required. Nobel Prize-winner Paul Krugman has warned that rapid cuts in spending and tax rises will tip the world back into a global recession and repeat the mistakes of the 1930s.

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