TORONTO (Reuters) - World leaders moved away on Saturday from lockstep policy pledges to secure economic recovery, leaving countries leeway to chart their own courses in taming government debt and clamping down on banks to prevent another financial crisis.
The Group of 20 leaders of the world’s richest and emerging nations, holding a two-day summit in Toronto, neared agreement on broad principles to halve their budget deficits within three years and toughen bank capital requirements, according to a draft communique obtained by Reuters.
But they are leaving room for each country to choose its own timetable.
China conceded that its yuan currency was a valid topic of discussion here, reversing its earlier opposition, as the G20 tries to make good on a promise to iron out imbalances between export-rich countries, such as China, and indebted consumer nations including the United States.
The shift toward tailor-made solutions -- seen in the approach to budget deficits, bank reform and trade -- contrasts with the last three G20 summits where they linked arms to combat the worst global recession in decades.
The draft document shows countries will be given a choice whether to levy taxes on banks to recoup bailout costs -- Europe had pushed for a global tax -- and can phase in stricter bank capital rules to fit national needs.
On trade, the draft ditches mention of the Doha round of world trade talks, proposing instead regional or bilateral deals.
A synchronized world recession has given way to a three-speed recovery, with Asia’s growth roaring ahead while the U.S. recovery plods along and Europe lags behind, making it harder for the G20 to agree on a one-size-fits-all approach.
“The scars of this crisis are still with us,” Treasury Secretary Timothy Geithner said.
“We all need to act to strengthen the prospects for growth. This will require different strategies in different countries. We are coming out of the crisis at different speeds.”
Trillions of dollars in stimulus spending, bank bailouts and emergency loans to combat the worst recession in decades have saddled governments with budget problems. Greece’s debt troubles have trained attention on the need to get public finances back on track.
The draft G20 statement acknowledges the multispeed recovery and the delicate balance needed between restoring budget discipline and sustaining growth.
”There is a risk that synchronized fiscal adjustment across several major economies could adversely impact the recovery,“ the draft statement said. ”There is also a risk that the failure to implement consolidation when necessary would undermine confidence and hamper growth.
In Europe, the emphasis is on budget cuts to restore confidence. The United States wants the rest of the world to bolster domestic demand and not rely on Americans as consumers of last resort.
Argentina’s President Cristina Fernandez said Europe’s focus on cutting deficits is “absolutely wrong,” citing her country’s searing experience with austerity which she said helped lead to a massive default in 2001.
“It all ended in an implosion and in default,” she told Reuters in an interview.
Brazil’s Finance Minister Guido Mantega said the budget targets were “too tough”.
Angel Gurria, secretary-general of the Paris-based Organization for Economic Co-operation and Development, struck a middle path saying that to ignore the debt burden could drive up borrowing costs, but cutting back too soon may worsen unemployment.
“Getting the balance right is primordial,” he said.
Earlier on Saturday, the Group of Eight advanced economies met at a lake resort north of Toronto and said the recovery was “fragile.” They pledged to work for a safer economic future.
“While the recovery consolidates, we are at a crossroads,” the G8 communique said.
“The emerging hope and optimism must be directed toward building the corporate world safer, fairer, more inclusive and sustainable in which a greater attention is paid to the improvement and evaluation of real well-being of residents.”
The G8 also took on security threats from Iran and North Korea, urging those countries to step back from moves that threaten international security.
Fog disrupted the G8 leaders’ journey south to Toronto where the wider G20 convenes. British Prime Minister David Cameron hitched a helicopter ride with U.S. President Barack Obama, while other leaders resorted to ground transport.
They avoided protesters. A police car was set on fire and windows were smashed as black-clad anarchists faced off against riot police near the fenced-off site of the G20 summit in the convention center in downtown Toronto.
European Commission President Jose Manuel Barroso took no chances, jumping into a helicopter on the outskirts of Toronto which carried him over the protests to his hotel.
World leaders broke away for a series of bilateral discussions that yielded some progress on trade and international relations.
Chinese President Hu Jintao accepted Obama’s invitation for a formal state visit at a date to be determined.
Obama vowed to press for completion of a long-stalled free trade agreement after meeting with South Korean President Lee Myung-Bak.
He and Cameron made some progress toward settling their transatlantic disputes. They agreed nothing was to be gained from damaging BP over the Gulf of Mexico oil spill that has spawned an environmental disaster.
They also gave each other beer to settle a friendly wager over the countries’ June 12 World Cup soccer match, which ended in a 1-1 draw. Yet even that gesture underscored international differences.
Obama pointed out Americans drink their beer cold and refused to drink the English one warm.
Reporting by Reuters G20 team; Writing by Emily Kaiser;Editing by Chizu Nomiyama and Stella Dawson