UK Prime Minister Gordon Brown said the global economy has yet to feel the biggest impact of government-led spending programmes to stimulate demand and reiterated concerns about removing them too early.
“The stimulus that we have still got to give the world economy is greater than the stimulus we have already had,” Brown said yesterday before his departure today for the Group of 20 meeting in Pittsburgh.
“What we want to do is safeguard a recovery from a recession we feared would develop into a depression.”
Politicians in Britain are calling for the government to put the brakes on spending and to focus on curbing the budget deficit that next year will exceed 12 per cent of gross domestic product, the most in the G20.
The International Monetary Fund in April estimated that fiscal stimulus packages between 2008 and 2010 amounted to 3 per cent of GDP for the UK, 3.2 per cent for the US and 2.9 per cent for Japan.
Brown is seeking support for a formal series of meetings between world leaders to coordinate economic policies and tackle problems ranging from trade imbalances to bonus pay earned by bankers.
Brown said economic recovery was not yet guaranteed, adding to comments from US President Barack Obama who last week said the unemployment rate “could even get a little bit worse, over the next couple of months”.
French Finance Minister Christine Lagarde, who will also be in Pittsburgh along with President Nicolas Sarkozy, echoed those sentiments.
The G20 needs to “give a very strong signal that they will continue the stimulus plans,” Lagarde said on France Inter radio. “We’ve stopped the freefall, but we must continue to underpin the economy.”
Britain and the US are proposing similar measures to get national governments to steer economic policy so that future imbalances can be unwound before they damage the system.
“By meeting at Pittsburgh, we are looking at how we can put in place for the future the mechanism or path that can lead us to either making decisions about better ways of creating growth that is sustainable in the future, a better early warning system for the world economy about potential crises, a better way of resolving difficulties or imbalances around the world,” Brown said.
He suggested that China, India and South Korea, which have had surpluses in recent years, favour his measures as much as the US, which joined Britain in maintaining deficits.
“I have been talking to many countries in Asia as well as in Europe, and I have been talking to President Obama and others, and I believe that there is support for that framework,” Brown said.
The G20 accounts for about 85 per cent of the world economy. The Pittsburgh talks will be the third summit of its leaders in the past year. Its members are Argentina, Australia, Brazil, Canada, China, France, Germany, India, Indonesia, Italy, Japan, South Korea, Mexico, Russia, Saudi Arabia, South Africa, Turkey, the US, the UK and the European Union. – Gulf News