June 28, 2010

At G20, Harper urges 50% cut to deficits by 2013

VINCE VERSACE

staff writer

To foster a strong and lasting economic recovery G20 nations are being asked by Canada to halve their deficits by 2013. “As leaders, our primary objective must be to encourage economic growth and promote job creation for our citizens,” Prime Minister Stephen Harper wrote in an address to his fellow G20 leaders.

“The fiscal stimulus we have implemented was necessary to protect our economies from a much worse crisis. It worked. But, we are not out of the woods yet.”

Harper would like G20 leaders to agree that deficits be halved by 2013 and that by 2016 government debt-to-GDP ratios should be stabilized or be in decline. These targets could be a minimum for some nations which may meet them sooner.

“Fiscal consolidation can only succeed, if we take concerted actions across the G20 to support global demand, reduce the unacceptably high rates of unemployment and reduce global poverty,” Harper added in his G20 letter.

Where nations at the G20 Toronto summit fall on the issue varies, from Great Britian and Germany hinting at even stricter targets, to the European Union’s top commission official agreeing to Harper’s targets and Brazilian officials stating some European countries are tightening too fast, jeopardizing the global economic recovery. Canada’s associate deputy minister of finance said all G20 countries have a responsibility to take actions and this variance in opinion is why summits like the G20 are crucial.

“The highest priority at this summit is to safeguard the strengthening of the recovery and lay the foundation for ongoing, durable, sustainable, balanced growth,” said Tiff Macklem.

Focusing on the financial commitments made in G20s past, improving the quality and quantity of bank capital, strengthening liquidity standards and financial market infrastructure and improved supervision are integral to bolster the economic recovery globally, Canada has stated.

“This meeting is coming up at a critical juncture and it will be a very important discussion,” said Macklem. “It is really a question of finding the right balance. There is a risk that failure to commit, communicate and move forward with clear credible fiscal consolidation plans could undermine the recovery.”

Where appropriate, countries should complete their stimulus plans for this year and addressing areas such as strengthening social nets, infrastructure spending and financial structural reforms will help “increase growth prospects,” said Dimitri Soudas, director of communications for the Prime Minister’s Office.

“No one said the task of the G20 leaders agreeing to specific targets (outlined in Harper’s letter) was going to be easy,” explained Soudas.

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