U.S. stimulus pullback dominates G20 economy talks

Thu Sep 5, 2013 11:45am EDT
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By Alexei Anishchuk and Gernot Heller

ST. PETERSBURG, Russia (Reuters) - Emerging and developed G20 powers struggled to find common ground on Thursday over the turmoil unleashed by the prospect of the United States reducing a flood of dollars to the world economy.

The Group of 20, which took the lead in responding to economic crisis in 2009, is now at odds as the U.S. recovery gains pace, Europe lags and developing economies face blowback from the looming 'taper' of U.S. monetary stimulus.

"Our main task is returning the global economy towards steady and balanced growth. This task has unfortunately not been resolved," Russian President Vladimir Putin told leaders as they met at an annual summit in St. Petersburg.

"Therefore systemic risks, the conditions for an acute crisis relapse, persist," Putin said.

The summit was overshadowed by great-power tensions over the Syria crisis, with leaders to address security matters over dinner after their traditional debate on the world economy.

Departing from his prepared remarks, Putin avoided explicitly referring to risks arising from U.S. monetary policy. But the message from the BRICS caucus of emerging markets, which met earlier, was unmistakably aimed at Washington.

The BRICS announced they would commit $100 billion to a currency reserve pool that could help defend against a balance of payments crisis, although the mechanism will take some time yet to set up.

"The eventual normalization of monetary policies needs to be effectively and carefully calibrated and clearly communicated," the BRICS - Brazil, Russia, India, China and South Africa - said in a joint statement.   Continued...

European Council President Herman Van Rompuy (R) and European Commission President Jose Manuel Barroso arrive to take part in the G20 Summit in St. Petersburg, September 5, 2013. REUTERS/Ilya Pitalyov/RIA Novosti/Pool