Leaders of the world’s biggest economies acknowledged there is no one-size-fits-all solution to the world’s economic troubles, agreeing in Toronto to halve the budget deficits of most industrialized nations by 2013, while giving each country the leeway to cut spending at its own speed.
The compromise was the result of divisions between the Obama administration, which emphasizes the need to continue stimulating growth and job creation, and some of its principal allies, which have grown alarmed over soaring debt levels.
For much of the weekend, discussions around the gathering of the Group of 20 industrialized and developing nations focused on whether leaders should stay the course they set last year, when they agreed to try to jump-start the economy in large part through government investment.
But the summit’s final communique reflected the strong concern about continued borrowing and spending held by many European leaders, whose countries have been battered in recent weeks by financial markets worried about their high debt levels. They came to Toronto pushing an agenda of austerity, and succeeded in securing the pledge to aggressively slash spending.
“Honestly, this is more than I expected, because it is quite specific,” said German Chancellor Angela Merkel, a leading voice for deficit reduction. “It’s a success that industrialized countries as a group accepted this.”
However, the communique also included some language echoing President Obama’s concerns about ending current economic stimulus plans too quickly. “To sustain recovery, we need to follow through on delivering existing stimulus plans, while working to create the conditions for robust private demand,” it said.
The communique offers each country flexibility in deciding when to begin reducing its deficit and avoided specific targets for each nation advocated by some participants. A White House statement said deficit reduction “needs to be calibrated … and tailored to national circumstances.”
“Here is the tightrope we must walk,” said Canadian Prime Minister Stephen Harper, the host of the summit, who found himself seeking common ground between deficit hawks and stimulus proponents.
“To sustain the recovery, it is imperative we follow through on existing stimulus plans,” Harper said. “At the same time, advanced countries must send a clear message that as our stimulus plans expire, we will focus on getting our fiscal houses in order.”
At his post-summit news conference, Obama stood behind the deficit target set by participants but still pressed his concern about the need for governments to stimulate economic growth.
“We must recognize that our fiscal health tomorrow will rest in no small measure on our ability to create jobs and growth today,” he said. “This is my highest economic priority as president.”
Vowing that the U.S. will not fund prosperity for the rest of the world, he pledged to even out trade imbalance around the world and end the “undue advantage” some countries have over others in the global marketplace.
That means a fair playing field for American exports and currency, Obama said, announcing a goal of doubling U.S. exports over the next five years as well as a renewed push for currency values that are driven by the market.
“After years of taking on too much debt, Americans cannot — and will not — borrow and buy the world’s way to lasting prosperity,” Obama said. “No nation should assume its path to prosperity is paved with exports to America. Indeed, I’ve made it clear that the United States will compete aggressively for the jobs and industries and markets of the future. “
The weekend of meetings, both of the Group of 8 leading industrialized nations in a nearby resort town and of the G-20 in Toronto, were tense within and without. A day after protesters smashed windows and attacked police cars, authorities detained hundreds of demonstrators in an attempt to contain the disruption.
Leaders reached consensus on a number of fronts, including on the question of limiting the emission of greenhouse gases.
In a last-minute turn, G-20 negotiators agreed to more ambitious plans to trim government subsidies to oil companies, part of their broader effort to reduce greenhouse gas emissions.
Earlier in the week, negotiators were working out an agreement that called for each of the 20 countries to take “voluntary” measures to cut oil production and consumption incentives. But under private pressure from the Obama administration over the last two days, the group is preparing to sign an agreement that omits the word “voluntary.”
The delegates also addressed the oil spill now threatening the Gulf of Mexico’s coastline, saying they recognize the need to protect the marine environment and prevent accidents related to offshore drilling and exploration.