G20 draft sets out action plan for growth

G20 leaders meeting in southern France were finalising an action plan on Thursday to try and return the world economy to balanced growth and could also seek to ramp up the IMF's resources to help countries rocked by economic shocks. A draft communique seen by Reuters, dated November 2, showed the Group of 20 major economies will agree to hold countries with big budget deficits to fiscal consolidation and those with trade surpluses to boost internal demand.
The plan includes a pledge by Italy to cut its debt and deficit, sources told Reuters, as the G20 tries to tackle the gaping imbalances that set the stage for the 2007-09 crisis and hold Europe to cleaning up its fiscal mess. "Countries with excessive debt burdens should immediately start fiscal consolidation. Countries in the eurozone that are viewed by the markets as safe havens should support demand and thus facilitate the situation for their weaker partners," Russian President Dmitry Medvedev said.
G20 leaders said the summit in the French Riviera resort of Cannes - which was dominated by the sudden prospect of Greece quitting the euro - broadly agreed that the IMF's funds should be increased to send a message of confidence and give it the means to fight future crises.
British Finance Minister George Osborne said China was supportive and no dissenting voices had been raised in talks where the G20 has been under pressure to show the same decisiveness it did in agreeing measures to tackle the 2008 crisis. "The international community has accepted that it needs to address the general global economic situation and there is a debate that has begun but not concluded on increasing resources to the IMF in the classic way," Osborne said.
"I've not heard anyone object to the suggestion that we should increase the resources of the IMF," he said, adding: "From what I've heard of the Chinese, they too are interested in providing support to the IMF." Chinese President Hu Jintao said in Cannes: "At this critical moment, the G20 must work to address the key problems, boost market confidence, defuse risks and meet challenges, and promote global economic growth and financial stability."
SHORT-TERM TAKES OVER Australian Prime Minister Julia Gillard said she hoped any action would be fast. "There is a broad view among G20 there does need to be additional financing ... we will be working on it overnight and tomorrow," she told reporters in Cannes. French President Nicolas Sarkozy had hoped to use his year as G20 steward to achieve ambitious goals including a rethink of the global financial system and measures to fight commodity price volatility.
He has had to scale back his expectations, however, as the crisis that began two years ago in Greece has sucked in other heavy debtors in the bloc, sowing alarm in financial markets. "The greatest vulnerability threatening the economy is the sustainability of public debt in developed economies," Turkish Prime Minister Tayyip Erdogan said.
"We still have serious risks and challenges we need to overcome for the future of the global economy, especially in Europe but also elsewhere with high public debt, unemployment and global imbalances. It is important all G20 countries cooperate even more than before," he said. The G20 will unveil its final communique on Friday.