“France, Germany and Japan have all officially come out of recession and now begins the tricky task of … withdrawing those big stimulus packages that we saw used to stimulate the world economies begins,” he said.
But Gordon Brown, the UK prime minister, said in his opening remarks it was too early to scale back the taxpayer-funded fiscal stimulus packages approved at April’s London summit credited with preventing a deeper crisis.
Such a move would be a “serious mistake” and could undermine the “tentative signs of recovery”, he cautioned.
“It’s clear in my view that too early a withdrawal of vital support could undermine the tentative signs of recovery we are now seeing and lead to a further downward lurch in business and consumer confidence,” Brown said.
More than half of the $5 trillion expansion pledged by world leaders to boost economies has yet to be delivered, and this should be put in place before any winding down, he said,
In fact, many current growth forecasts were based on the fact “that the effective global fiscal stimulus of 2010 will be of the same scale as 2009 so given the risks we face, this is clearly not the time for economic complacency”, he said.
While exit strategies are high on the agenda, the rift over how to tackle the issue of bankers’ bonuses threatens to dominate the meeting.
France has led the calls for tough action, with Christine Lagarde, the finance minister, promising an “onslaught on bonuses”.
Lagarde said on Friday there was “no question of a return to the old rules” on bankers’ pay, which is blamed by many for encouraging a short-term pursuit of profit that helped severely to destabilise the financial system.”
|The talks have not drawn the protests seen at the G20 meeting of April in London [EPA]|
“Public opinion is horrified by the amount of compensation paid to traders,” she said.
France wants bonuses to be capped or a targeted tax on excess pay, a call strongly backed by Germany, as some major banks indicate that they are resuming their bonus policy as the economy picks up.
But the US and Britain, keen to protect the status of Wall Street and the City of London as the world’s leading financial centres, are opposed to the proposal for a simple cap.
Alistair Darling, the British finance minister, has dismissed the idea as “unenforceable” because top bankers would simply find other ways to reward themselves.
“A cap is easy to get round. It is more important to stop the practices that caused the problems in the first place,” he said in an interview with the Times newspaper on Saturday.
Point of contention
Stephen Barber, a financial expert at the Global Policy Institution, spoke to Al Jazeera of the main point of contention.
“Over the last few months, politicans have poured billions of dollars into their economies. The issue is when will this stop,” he said.
“Clearly if you are in London, you want these measure to carry on for a little longer as your economy is still in recession.
“If you are sitting in Bonn, you want it to stop because you want to get you finances under control and prevent over inflation.
“And frankly they probably see the Anglo-saxons economies as the cause of the problem in the first place.”