Southern European countries need to cut deficit - Osborne

SHANGHAI (Reuters) - Euro zone countries, especially those in southern Europe, need to cut their budget deficits to show that they can live within their means, Chancellor George Osborne said on Friday.

British Chancellor of the Exchequer George Osborne visits the UK Pavilion at the Shanghai World Expo site June 4, 2010. REUTERS/Aly Song

Osborne, visiting China ahead of the G20 meeting this weekend in the South Korean city of Busan, said that Britain’s planned austerity measures to cut the budget deficit will boost confidence in the economy, adding he was optimistic about the global economic outlook.

“I think if we are able to show that we can do that, and I am confident we can, then I think that will bring economic confidence,” Osborne, deficit hawk, told UK business leaders in Shanghai.

Officials with the new coalition government have said they will go ahead with plans to push through tough measures in an emergency budget on June 22.

Ahead of the G20 meetings in Busan and Toronto later this month, Osborne said sustaining world economic growth would be the most important, particularly on dealing with global imbalances.

“Countries with high budget deficits show the world that they can reduce those deficits and deal with those deficits, and equally that surplus countries like China show that they too support economic growth going forward.”

Despite concerns over British companies’ market access in China, Osborne stressed Britain’s openness towards Chinese business and investments.

“At the moment, only 2 percent of British exports go to China, I want to increase that. I also want to increase Chinese investment into Britain through companies like Shanghai Automotive company and others,” he said.

Osborne added that the new coalition government sought to establish strong relations with Beijing.

“This relationship between Britain and China can only get stronger and I think both countries can do a lot to increase the prosperity of the world economy,” he told reporters. (Reporting by Farah Master; Editing by Jacqueline Wong & Kazunori Takada)