The Group of 20 rich and emerging
nations later this week will warn against complacently assuming a sustainable
global economic recovery, while admitting sickly public finances could hurt
long-term growth, a draft G20 document shows.
The European Union will push for
taxes on banks and financial transactions; a proposal likely to draw opposition
from Canada and other countries who say their banks weathered the financial
crisis well and should not be penalized.
The G20, which meets in Toronto
this weekend, has claimed credit for a strong, unified crisis response that
helped prevent a global recession in 2008 from becoming a depression.
But as the economy recovers, G20
unity is fraying.
The group still must forge
consensus on controversial topics such as how quickly to shrink government
deficits, how best to strengthen banks so that they can withstand any new
downturn, and how to harmonize financial regulatory reforms.
The draft version of the summit
communiqué dated 11 June, reflected divisions over which policy priority ought
to take precedence — supporting still-shaky growth or shrinking budget
Bank of Canada Governor Mark Carney
said governments must plan for austerity but not rush to belt-tighten all at
“It’s a question of getting
the balance right,” Carney said in an interview with Reuters Insider.
“Nobody should be looking to
balance their budget next year. Nor should anybody be in a position where they
think there’s no need to start laying out a plan to stabilize their debt
position, the United States included.”
Europe’s simmering debt troubles
served as a reminder that when markets lose faith in governments’ ability and
willingness to rein in spending, borrowing costs soar and countries are forced
into swifter, harsher fiscal fixes.