Debt reduction: G20 agrees not to set hard targets

April 20, 2013

G20 economies
G20 economies

Finance leaders of the G20 economies said on Friday they agreed they did not need to set hard targets for reducing national debt levels, and said they would be watching for negative effects from massive monetary stimulus efforts, such as Japan. Russian Finance Minister Anton Siluanov said at a news conference that finance officials from the Group of 20 nations believed overall debt reduction was more important than specific figures.

“We agreed that these would be soft parameters, these would be some kind of strategic objectives and goals which might be amended or adjusted, depending on the specific situations in the national economies,” he said. In a communique released after a two-day meeting, the G20 said it would be “mindful” of possible side effects of extended periods of monetary stimulus. Central banks have flooded their economies with cheap funds to try to boost borrowing and spending but that has raised concerns about excessive capital flight, particularly to developing nations.

Siluanov said the G20 agreed that greater monitoring of the side effects of Japan”s $1.4 trillion program announced earlier this year was needed. The G20 discussions were dominated by talk of the struggling euro zone, Siluanov said, where harsh austerity measures have failed to lift the region out of its economic slumber. The nature of the discussion was of some concern to officials in other nations. “It was supposed to be a G20 meeting, but for a moment I thought it was a G7 meeting. All that we heard was how sick Europe is and how badly affected many countries of the world are,” said India”s finance minister, P. Chidambaram, who spoke at the Peterson Institute in Washington. “They have a very accommodative monetary policy. They are doing whatever it takes to rescue economies that seem to be tumbling one after another.”

SOFT DEBT TARGETS There has been some disagreement over the need for specific targets for reducing debt. The United States and Japan have opposed committing to a targeted debt-to-GDP level. Russia – this year”s G20 chair – had hoped to secure an agreement on targets by the time G20 leaders meet in St. Petersburg in September. The world”s biggest economies are rethinking the austerity drive that dominated the last few years. The austerity argument has been undercut by weakness in economies that undertook severe measures to cut deficits, including Britain, which is headed into its third recession in the last five years.

Fitch cut its credit rating on Britain on Friday to double-A-plus, citing expectations that general government debt will rise to 101 percent of GDP by 2015-2016 due to weak economic growth. Siluanov also said a greater amount of coordination was needed with the International Monetary Fund on global liquidity, with recommendations expected by next July. G20 ministers called on the Financial Stability Board to oversee work on reforms for short-term interest rate benchmarks such as Libor in the aftermath of a global rate-rigging scandal. FSB was asked to report back in July on its progress. Source Reuters
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Published: Zarai Media Team

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