US warns over recession risks as G20 meeting starts

The US has said the world’s largest
economies should focus on maintaining growth to avoid a double-dip recession.

As the G20 summit begins in Canada,
US Treasury Secretary Timothy Geithner said Europe and Japan should boost domestic
demand instead of cutting spending.

European leaders have said reducing
government deficits is key to setting long-term growth on track.

But Brazil warned that steep budget
cuts could harm emerging economies.

Speaking in Toronto, scene of the
summit, Mr Geithner said the global economy was still emerging from its crisis
and “the scars of this crisis are still with us”.

He said: “This summit must be
fundamentally about growth.”

Emergency assistance that G20
leaders agreed on at previous summits at the height of the economic crisis must
not be withdrawn too soon, he said.

“We’re going to avoid that
mistake by making sure that we recognize that it’s only been a year since the
world economy stopped collapsing,” he said.

Europe and Japan should do more to
stimulate domestic demand to make it easier for other countries to export to
them.

With countries emerging from the
global downturn at different speeds, splits have emerged in how to proceed.

Spooked by attacks on the euro
currency prompted by Greece’s debt crisis, European governments have focused on
cutting spending to reduce their deficits.

A draft version of the summit’s
communique suggested the Group of 20 richest and emerging economies was nearing
a compromise, Reuters news agency said.

This would see an agreement to
halve budget deficits by three years and toughen banking regulations.

Brazil said the focus on cutting
deficits could harm emerging economies.

“If the cuts take place in
advanced countries it is worse,” said Brazilian Finance Minister Guido
Mantega.

“Because instead of
stimulating growth they pay more attention to fiscal adjustments, and if they
are exporters they will be reforming at our cost.”

Thousands of demonstrators marched
on the G20 summit on Saturday in what is being reported to have been a largely
peacefully rally that saw outbreaks of violence on its edges. These saw groups
of young men scuffle with riot police and set fire to at least two patrol cars.

The G20 meeting follows the summit
of the G8 group of industrialised nations, which met at a lakeside resort
outside Toronto.

They condemned North Korea for the
sinking of a South Korean warship in March.

The G8 leaders also criticised
North Korea – and Iran – over their nuclear activities, and they described the
Israeli blockade of the Gaza Strip as “not sustainable”.

And they admitted that the global
financial crisis had compromised efforts to meet UN targets for reducing world
poverty.

On Friday, they agreed to donate
$5bn (£3.3bn) over five years towards improving the health of mothers and young
children in the developing world.

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