In a reversal from the unity of
the past three crisis-era Group of 20 summits, the leaders left room to
move at their own pace and adopt "differentiated and tailored"
policies.
The G20 rich and
developing economies tried to balance their contrasting priorities by
pledging to halve budget deficits by 2013 without stunting growth, and
to clamp down on risky bank behavior without choking off lending.
"Our challenges are as diverse as our
nations," President Barack Obama said. "But together we represent some
85 percent of the global economy, and we have forged a coordinated
response to the worst global economic crisis of our time."
In a sign of how much work was involved to
forge this G20 consensus, negotiators spent at least 45 hours drafting
the summit's final communique, said Dominique Strauss-Kahn, head of the
International Monetary Fund.
The
G20 allowed each country space to decide how to proceed with
controversial provisions such as taxing banks to recoup bailout costs
and implementing tougher bank capital rules.
It
also steered clear of confrontation with China by dropping, at the last
minute, a specific mention of the yuan currency, even though Beijing
has just allowed it to resume its rise against the dollar.
The G20, which includes emerging economic
powers as well as the developed economies where the economic trouble
started, united last year to throw trillions of dollars into the battle
against recession.
But that unity
has begun to fray as countries emerge from crisis at different speeds
and with different policy needs. Emerging Asian economies such as China
have come roaring back while the U.S. recovery remains tepid and Europe
lags behind.
"The G20 is fragmented
as it transitions out of its role as a crisis-fighting committee," said
Tom Bernes, vice president at the Center for International Governance
Innovation in Toronto.
"While G20
leaders agree on the need for stronger financial regulation, actual
details continue to be vague and lacking a solid deadline.... There is a
huge unfinished agenda."
Obama
acknowledged talk of G20 divisions but said the meetings showed these
countries could come together and embrace shared interests. "We can
bridge our differences," he said.
EUROPE
CLAIMS VICTORY
The Toronto
meeting was billed as a final check-up before the next G20 summit in
November in Seoul. That meeting is the deadline for leaders to agree
policies on issues including bank capital rules, financial regulation,
and voting rights at the International Monetary Fund.
The G20 must also show progress on a
promise to rebalance the global economy. That means export-reliant
nations such as China and Germany need
to look inward for growth and indebted countries, including the United
States, need to change their borrow-and-spend ways.
As the leaders met inside a downtown
Toronto conference center encircled by a tightly controlled security
perimeter, police clashed with protesters outside the zone and more than
500 people were arrested.
Since
the G20 leaders last met in Pittsburgh in September, Greece's debt
troubles have shifted the focus toward damaged public finances. Britain
and Germany have joined Greece, Spain, Italy and other smaller European
countries in putting forward plans to reduce spending.
The United States has preached patience,
cautioning that the sudden removal of growth supports could tank the
economy. European leaders have countered that fixing finances will
improve confidence, and that is essential for growth.
European officials took the G20's commitment
to cut deficits as a clear sign that the rest of the world had come
around to Europe's point of view.
"The
EU came to Toronto with a clear agenda. The summit's result reflects
widespread convergence around Europe's approach," European Union
officials said in a statement.
Halving
deficits looks easily achievable, considering Obama has already pledged
to do that and Europe sees the target as a bare minimum.
Heavily indebted Japan appears
to be the one major advanced economy that might struggle to hit the
deficit mark. In the communique, the G20 acknowledged the "circumstances
of Japan" and welcomed its plans to shore up finances.
Stabilizing debt as a percentage of total
output within six years may be harder. Obama's budget forecasts show the
debt ratio rising at least through 2015, and most advanced Western
economies face rising costs as their populations age.
The IMF's Strauss-Kahn said deficit targets
were less important than policies.
"Talking
about halving the deficits is oversimplifying the problem because it
differs from one country to another," he said. "I am more interested in
the fact that countries do implement the right measures."
With growth likely to remain slow in most
advanced economies, fast-growing emerging markets are increasingly
expected to pick up the slack.
China
gets most of the attention thanks to its soaring economy and huge
population of relatively untapped consumers, but there were signs that
other emerging powerhouses were beginning to feel put upon.
"It's not fair that emerging economies
should have to take on the job of rich countries to provide growth,"
Brazilian Finance Minister Guido Mantega told Reuters.
(Additional reporting by Brad Whitehouse,
Reporting by Reuters G20 team; Writing by Emily
Kaiser; Editing by David
Storey)
