BRUSSELS (Reuters) - G20 countries have agreed it is too soon to withdraw measures to end the global economic crisis and will discuss coordinating policy to wind up the trillions of dollars in support at talks in London this week.
European finance ministers meeting in Brussels said the worst of the recession was over in the 16 countries that use the euro currency but ruled out an immediate end to the fiscal and monetary help.
A British government source said there was agreement on this in the Group of 20 developed and developing economies, whose finance ministers meet in London at the weekend, and “everyone thinks it is certainly too early to declare victory.”
The G20 ministers are also expected to discuss a U.S. push for agreement on giving emerging market countries more voting power in the International Monetary Fund. A G20 source said Washington wanted at the very least a statement to be made on the issue when G20 leaders meet in Pittsburgh on Sept 24-25.
The ministers and central bankers will assess in London how far the world economy and banking system is recovering from two years of crisis.
“The worst is over for the time being,” Jean-Claude Juncker, the chairman of euro zone finance ministers, said after new data confirmed only a 0.1 percent fall quarter-on-quarter in euro zone gross domestic product in the April-June period.
He said the time had “not yet come to withdraw the fiscal stimulus.” But the euro zone ministers agreed they must be ready to withdraw the measures when the time comes and that this should be coordinated globally.
“We will discuss this weekend at the G20 how to coordinate action, how to react in a coordinated way to better continue to increase demand at the global level,” EU Economic and Monetary Affairs Commissioner Joaquin Almunia said.
In London, a British government source said there was broad agreement on the need for a coordinated withdrawal of the measures, which included large injections of cash to boost national economies and support banks.
“The general feeling is that support measures need to be in place until recovery is assured,” the source said.
He said countries would act depending on their particular strategies, but should exchange information and tell each other what was planned.
A senior Canadian finance official echoed the European position, saying there were signs of economic stability in Canada but it was too early to unwind stimulus for the world economy. The official said G20 countries should also follow through on commitments to strengthen the financial system.
Governments across the world have spent trillions of dollars on economic stimulus packages, prompting a debate about how eventually to remove this support.
There are also questions about how widespread and sustainable the return to growth is. Economies could slump again if the stimulus is removed too soon, but inflationary pressures could grow if it is left in place too long.
Chancellor Alistair Darling urged his G20 colleagues to focus on “the current macroeconomic conjuncture and further responses needed to secure the recovery.”
“I propose we also take the opportunity to discuss how to ensure high sustainable global growth in the medium term,” Darling wrote in a letter.
BANKERS’ BONUSES UNDER FIRE
EU ministers are also likely to push at the G20 meeting for a change in the culture of bankers’ bonuses, which some believe helped cause the excessive risk-taking by financial institutions that led to the global financial crisis.
“The bankers are partying like it’s 1999, and it’s 2009,” Swedish Finance Minister Anders Borg said. But some European finance ministers said it would be a challenge to persuade Britain to sign up to strict limits, as proposed by France.
G20 sources also said the United States would push at the London meeting for changes in voting power in the IMF.
Emerging economic powers such as China, Russia, Brazil and India want more voting power in global financial institutions such as the IMF. The United States and European countries still dominate the global lender but Washington has sought to push the issue up the agenda under President Barack Obama.
“The Americans are pushing for at the very least a statement on the subject in Pittsburgh, even if it is not resolved,” a European G20 source said.
Additional reporting by Lesley Wroughton, Sumeet Desai, Matt Falloon, Jan Strupczewski, Marcin Grajewski and John O’Donnell; writing by Timothy Heritage; Editing by Ron Askew
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