Exclusive: G20 to consider cutting debt to well below 90 percent/GDP: document

Sat Apr 13, 2013 11:25am EDT
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By Jan Strupczewski

DUBLIN (Reuters) - Financial leaders of the world's 20 biggest economies will consider next week in Washington a proposal to cut their public debt over the longer term to well below 90 percent of gross domestic product, a document prepared for the meeting showed.

The proposal, prepared by the co-chairs of the G20 Working Group on the Framework for Growth, follows agreement of the leaders of G20 countries in June last year to set ambitious debt reduction targets beyond 2016, when, under an earlier agreement from Toronto in 2010, debt was to stop growing.

"The co-chairs proposed that: 'over the longer-term, G20 members should gear their fiscal policy towards achieving a debt level that is well below 90 percent of GDP,'" a document prepared for European Union delegates for the meeting said.

"We take note of the proposal made by the co-chairs on fiscal objectives as a good basis for discussion," said the document, endorsed by EU finance ministers on Saturday and seen by Reuters.

The European Union itself, however, has a more ambitious debt ceiling of 60 percent of GDP for its 27 members and will suggest a lower target for the G20 would be better, too.

"Our experience with...the 60 percent of GDP reference value shows the importance of a more ambitious debt anchor. Such a debt anchor is needed with a consolidation path that is carefully calibrated to sustain the recovery," it said.

"Advanced G20 economies should commit to a common debt reduction anchor including fiscal adjustment plans which point to a clear and credible downward path of general government debt levels," the document said.

Such targets would be easy for the European Union where the debt ratio is now 90 percent, or even for the United States with a debt of around 105 percent. But they could prove impossible for countries like Japan, where debt is well above 200 percent.   Continued...

An European Union flag flutters outside of the European Parliament in Brussels October 12, 2012. REUTERS/Francois Lenoir