G20 reluctant to remove stimulus, differs on climate change financing

08:05, November 09, 2009      

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It is still too early to remove stimulus, and climate change financing remains the key to success of the Copenhagen conference, the G20 finance ministers and bank governors said Saturday.

Representatives pose for a group photo after the G20 Finance Minister and Central Bank Governor Meeting in St. Andrews, Britain, Nov. 7, 2009. (Xinhua/Zeng Yi)

During the two-day G20 finance ministers and central bank governors meeting, the G20 policymakers held that many uncertainties still stood in the way of economic recovery, and the global economy would fall back to recession again if these uncertainties were not brought under control.

Both developed economies and developing countries agreed to maintain support for the recovery until it is assured, said a communique released after the meeting.

Although a series of positive signs showed up, such as the rising of stock value, house and commodity prices, British Prime Minister Gordon Brown maintained that these were "not a reason to end economic stimulus prematurely."

"We are only about halfway through dealing with the causes of the crisis," he said.

U.S. Treasury Secretary Timothy Geithner said at a news conference: "If we put on the brakes too quickly we will weaken the economy and the financial system... and the ultimate cost of the crisis will be greater."

Stephen King, global chief economist of HSBC, told Xinhua that developed countries were "like very sick patients being kept alive with special drugs," so it is hard to say whether they can gain a sustainable recovery after the stimulus is removed.

However, the G20 differed on ways of scaling back the stimulus and when. Though the United States, Japan and Germany hoped to lift the stimulus at an appropriate time, Britain stressed that the G20 should reach agreement over the principles for exit strategy and carry out the strategy in a coordinated way. Till now, Britain is still in recession.

For both developed and developing countries, stimulus policies are "a double-edged sword," analysts said. Officials are happy to see these policies have helped the economy out of recession, while they are worried that if the stimulus were not lifted at a good timing, they might face serious problems including inflation, quick-rising debts and asset bubbles.

By the end of the meeting, the G20 ministers agreed to adopt a detailed timetable on exiting stimulus measures, with the first steps to be announced by the end of January 2010, said the communique.

During the meeting, the G20, which accounts for the majority of the world economy, also discussed climate change financing, a month ahead of the UN Climate Change Conference in Copenhagen.

Britain's Prime Minister Gordon Brown (L) talks to the Chairman of the U.S. Federal Reserve Ben Bernanke (back to camera), U.S. Treasury Secretary Timothy Geithner (R) and Danish Prime Minister Lars Lokke Rasmussen, during a break at the G20 Finance Ministers meeting at a hotel in St. Andrews, Scotland November 7, 2009. British finance minister Alistair Darling urged his G20 counterparts on Saturday to work toward a $100 billion deal on tackling climate change.(Xinhua/Reuters Photo)

The ministers agreed that financing was the vital precondition for the success of the Copenhagen meeting, and also an indispensable part in dealing with climate change.

British Finance Minister Alistair Darling sent an appeal at a press conference that any efforts should be done to reach an agreement on climate change financing before Copenhagen conference.

"If there isn't an agreement on finance, if there isn't an agreement about contributions to make sure we can deal with this problem, the Copenhagen agreement is going to be much, much more difficult," he said.

However, the meeting failed to provide figures for climate change financing. The policymakers just committed to work toward an ambitious outcome in Copenhagen under the United Nations Framework Convention on Climate Change.

According to the communique, the G20 made no agreement on which options would be the most effective and feasible in tackling the threat of climate change.

The United States did not show its clear attitude on the financing issue, which was one of the main reasons for the failure to reach an agreement, observers said.

U.S. Treasury Secretary Timothy Geithner speaks during a news conference after the G20 Finance Ministers meeting at a hotel in St. Andrews, Scotland November 7, 2009. Britain threw its weight on Saturday behind proposals to impose a global levy on banks to fund future bailouts and called on the G20 to work toward a $100 billion deal to meet the cost of climate change.(Xinhua/Reuters Photo)

European Union leaders have also failed to specify how much they would contribute while agreeing that developing nations would need 100 billion euros (about 150 billion U.S. dollars) per annum by 2020.

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