Reflecting contrasting national priorities and differing views, world leaders at the G20 summit have pledged to halve budget deficits by 2013 – but agreed to take different paths towards lasting growth.
The heads of the Group of 20, which brings together established world powers and dynamic emerging economies, vowed on Sunday to nurture the still shaky global recovery with co-ordinated measures to spur growth and ensure financial stability.
Leaders tried to strike a unified chord, with Barack Obama, the US president, saying: "Every economy is unique and every country will chart its own unique course, but make no mistake, we are all moving in the same direction."
Stephen Harper, the Canadian prime minister and host of the summit in Toronto, said "the cohesion of the G20 was striking".
"We're following different policies but with a single objective; to ensure growth and recovery in a durable and balanced way."
But the compromise agreement followed divisions within the group over whether to cut or spend their way to economic recovery, a point acknowledged by Harper, who told his counterparts there was a "tightrope that we must walk to sustain recovery".
Obama, too, acknowledged talk of divisions, but said the meetings showed countries could come together and embrace shared interests and "bridge our differences".
"Our challenges are as diverse as our nations," he said. "But together we represent some 85 per cent of the global economy, and we have forged a co-ordinated response to the worst global economic crisis of our time."
The US wanted continued economic stimulus spending to galvanise the global recovery, and emerging economies such as India, China and Brazil were also opposed to spending cuts.
Guido Mantega, the Brazilian finance minister, warned that "we must not balance budgets on the backs of the world's poorest people".
But European countries facing debt crises pushed for fiscal restraint and secured a final statement at the end of two days of talks that warned that "failure to implement consolidation where necessary would undermine confidence and hamper growth".
"Reflecting this balance, advanced economies have committed to fiscal plans that will at least halve deficits by 2013 and stabilise or reduce government debt-to-GDP ratios by 2016," the statement said.
But the group exempted Japan and its huge public deficit from the pledge and noted that measures should be "tailored to national circumstances".
It also gave each country space to decide how to proceed with controversial provisions such as taxing banks to recoup bailout costs and implementing tougher bank capital rules.
Critics noted the agreements were not binding and the summit statement was filled with caveats and exemptions, pushing many of the tougher decisions on to the next G20 summit in South Korea in November.
|Despite the show of unity, divisions were apparent among the leaders [AFP]
The G20 united last year to throw trillions of dollars into the battle against recession, but that unity has begun to fray as countries emerge from crisis at different speeds and with different policy needs.
Emerging Asian economies such as China have come roaring back while the US recovery remains tepid and Europe lags behind.
Observers said the degree of divergence in the countries' policies for dealing with the recovery showed that, now that the initial shock of recession had passed, national agendas were once more crowding out global co-operation.
"I think we're seeing the end of the kind of lifeboat ethos here," said Andrew Cooper of the Centre for International Governance Innovation.
"If you look back to November 2008, there was a great deal of focus on this sort of near-death experience. I think that has loosened considerably. We've seen an allowance for national perspectives.
"Certainly no bank tax; certainly no sort of hard, firm criteria for debt fighting and certainly lots of exceptions, notably Japan," he said.
The G20 communique also steered clear of confrontation with China by making no specific mention of its currency policy, days after Beijing announced it would allow the yuan to resume its rise against the dollar.
But "a strong and durable recovery also requires countries not having an undue advantage", Obama told a news conference at the close of the summit.
"So we also discussed the need for currencies that are market driven," he said, welcoming China's decision to let its yuan float more freely against the dollar.
Obama said he believed China was serious on its pledge of greater currency flexibility and that the yuan - also called the renminbi, or RMB - would rise "significantly" on foreign exchange markets.
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"We didn't expect a 20-per cent revaluation in a week. That would be disruptive to the Chinese economy. It would be disruptive to the world economy.
"We do expect that as more and more market forces come to bear, that given the enormous surpluses that China has accumulated, that the RMB is going to go up, and it is going to go up significantly," he said.
"So we are going to be paying attention over the next several months to make that determination."
Obama also warned against looking to the US to buy the world's way to growth.
"After years of taking on too much debt, Americans cannot – and will not - borrow and buy the world's way to lasting prosperity," he said.
"No nation should assume its path to prosperity is paved with exports to America. Indeed, I've made it clear that the United States will compete aggressively for the jobs and industries and markets of the future."
The Toronto meeting followed on the heels of Friday's G8 summit, which was held just outside of the city, and violence flared on the fringes of protest marches for the three days.
By Sunday, hundreds of people had been arrested in incidents linked to the summits, with police using tear gas and rubber bullets to disperse crowds.