OTTAWA (Reuters) - Canada will ask the G20 to agree to tough new fiscal targets at a summit next week, but said the job of tackling debt should only start once the global recovery is assured.
Prime Minister Stephen Harper sent a letter to his G20 counterparts on Thursday proposing they agree to cut deficits in half by 2013 and stabilize or start reducing debt-to-GDP ratios by 2016, a senior aide to Harper told reporters on Friday.
Canada, which hosts the G8 and G20 summits next week, said countries should fully implement their fiscal stimulus plans but should start the process of fiscal consolidation by next year at the latest.
The proposed targets are mostly aimed at advanced countries and will require substantial effort by some, while many emerging economies are already well positioned, officials said in a briefing with reporters.
“The lesson here is that particularly the advanced countries with higher deficits need to get their fiscal houses in order, but there is a balance to be achieved here between sustained recovery and getting deficits down,” the official said.
“A lot of countries will get there sooner, including Canada,” he said.
Asked if some countries would not find Harper’s targets too onerous, the official replied: “They will have plans to end the stimulus, which will cut their expenditures. And furthermore our nations are recovering, so the revenues will climb and the expenditures will be cut.”
A unified position on sovereign debt levels is an attempt to soothe markets still on edge over the Greek debt crisis and big deficits elsewhere in Europe.
After nearly two years of co-ordinated effort by governments to pour billions into the global economy and stave off an even worse recession, the crisis-forged unity appears to be weakening when it comes to agreeing on when to withdraw stimulus measures.
Debt-wary Germany has been pressing for a swift clamp-down on public spending while the Obama administration has put more emphasis on protecting the still-fragile U.S. recovery.
Another thorny subject that Canada said will be raised at the G20 meeting, at least behind closed doors, is China’s currency peg to the U.S. dollar.
As the United States stepped up its pressure on China to move toward a market-based exchange rate and Beijing warned others not to meddle in its affairs, Canada said the issue would inevitably be discussed by the leaders but that no one country should be singled out.
China’s foreign exchange policy is just one of several reforms needed across the G20 countries to ensure balanced global growth, he added.
“A key message here will be that across the G20 all countries have things they need to do to support strong, sustained, balanced growth,” the official told reporters in a briefing.
“One of those things that I imagine will be discussed is the contribution a more flexible China exchange rate will make to that. But I think it’s important to avoid finger-pointing here and to say this in the context of a broader framework where all G20 countries have responsibilities and have policies to pursue.”
Reporting by David Ljunggren, writing by Louise Egan; editing by Mario Di Simine and Rob Wilson