G20 agree too early to remove stimulus - Darling

 

G20 policymakers are agreed that it is too early to pull the plug on economic life-support packages as the global recovery is still fragile, Chancellor Alistair Darling told Reuters in an interview.

Darling is hosting the third meeting of Group of 20 finance ministers and central bankers this year in St Andrews, Scotland later on Friday to put flesh on the bones of agreements made at a leaders' summit in Pittsburgh in September.

Since then there have been growing signs that the world is finally coming out of the deepest downturn in decades and that things may be getting back to normal after a crisis that wiped out some of the biggest financial institutions.

But Darling said it would be premature to declare victory and the extraordinary stimulus countries all around the world had thrown into their economies had to stay in place for now.

"I think we can reach agreement on firstly making sure we don't remove support too early because the recovery is by no means established everywhere" he said.

Perhaps the biggest issue for the policymakers this weekend will be the launch of a new framework to ensure better and balanced growth in the future and prevent a rerun of the crisis which has cast millions out of work globally.

"Just as there was a consensus that we took action over the last year to stave off a serious downturn, there is a consensus that we can work together so that the next decade is one of growth and one of job creation" Darling said.

"The key of course this weekend is how we do that but I am confident that people are willing to engage in that argument." 

Officials say that proposals on the table include a system whereby countries put forward their own projections for their own economies which are then looked at by the International Monetary Fund to see if they are consistent with each other.

If not, then alternative policies can be looked at within the G20.

Asked if that meant that countries would be given targets they had to achieve, for example on GDP growth, Darling said: "I don't think it is a case of people telling countries what they ought to do."

"Countries themselves have a very clear idea of what they want to do. We need to have a target in our mind as we work through this of where we want to see world growth in the next few years but obviously the growth rates in individual countries will be different."

Darling also said that currency moves and the weakness of the dollar were not on the main agenda of the Scotland meeting.

"There is a lot of volatility in exchange rates and other markets we have seen for perfectly obvious reasons. I think this weekend people are looking at medium and long-term issues."

LONG ROAD TO COPENHAGEN

Darling said another key theme of the meeting would be trying to secure a deal on climate finance ahead of an environmental summit in Copenhagen next month but he was doubtful that concrete results could be achieved.

"I want to use this weekend to engage finance ministers in the task of making sure we can get money on the table. We have been very clear we think 100 billion dollars will be required" he said. 

Talks on agreeing a budget for the cost of dealing with climate change at the last meeting of finance ministers and central bankers in London in September went nowhere after all sides could not find common ground.

"I think this is a classic case rather like world trade where the spirit is willing but some very great heavy lifting is going to be required if we are going to make the progress we need" he said.

Darling has invited the Danish prime minister to attend the St Andrews meeting to keep the focus on the Copenhagen summit.

"All of us know that there is a problem. That is the easy part, identifying the problem. All of us now have to show the same determination in getting recovery under way to making sure we deal with climate change" he said.

"There is a long way to go, it is by no means certain that we will get the deal we need at Copenhagen. I know we will try our level best level to get there."