Stimulus drive

Finance ministers from the world's 20 leading economies meeting in the Scottish golf resort of St. Andrews warned in a statement that it was not time to wind back the massive anti-crisis stimulus plans governments have rolled out to counter the downturn, pointing to the threat posed by escalating unemployment.

While saying that "economic and financial conditions have improved," the statement said "recovery is uneven and remains dependent on policy support." As a result, they agreed "to maintain support for the recovery until it is assured."

"If we put the brakes on too quickly, we will weaken the economy and the financial system, unemployment will rise, more businesses will fail, budget deficits will rise, and the ultimate cost of the crisis will be greater," US Treasury Secretary Timothy Geithner said.

The International Monetary Fund said in a report to coincide with the meeting in St Andrews that emergency stimulus measures must remain to avoid endangering a “nascent” economic recovery.

"Premature exit from accommodative monetary and fiscal policies could undermine the nascent rebound, as the policy-induced rebound could be mistaken for a strong and durable recovery,” the report warned.

Brown backs levy on financial transactions

Earlier in the day, British Prime Minister Gordon Brown urged the G-20 finance ministers to consider introducing a financial transaction levy, which could generate funds to help pay for possible financial sector bailouts.

"It cannot be acceptable that the benefits of success in this sector are reaped by the few, but the costs of its failure are borne by all of us," Brown told the meeting. He said a new social contract was needed between the public and the banks.

However, Brown stressed Britain would not act alone, saying such a tax would also have to be implemented by all the world's major financial centers, including the US, Europe, Asia, the Middle East and Switzerland.

The British premier joins German Chancellor Angela Merkel and French President Nicolas Sarkozy, who have been calling for the introduction of such a tax, modelled on a concept originally put forward by Nobel laureate James Tobin.

At a special summit of European leaders in Brussels some weeks ago, Merkel failed to find enough backing for the proposal to levy a global tax on financial transactions.

Washington, however, remains opposed to launching a transaction tax. "No, that's not something that we're prepared to support," US Treasury Secretary Tim Geithner told Sky News television, reiterating his country's opposition.

"But again I think we all share a basic interest in trying to make sure we have a system where taxpayers aren't exposed in the future, and where the financial institutions are bearing the consequences of their mistakes," Geithner added.

G-20 wants “ambitious” talks at Copenhagen

G-20 nations also committed to work towards an "ambitious outcome" at next month's UN climate change conference, but fell short of agreeing a figure on climate funding.

With the talks coming ahead of the Copenhagen summit, which aims to craft a replacement to the Kyoto Protocol, G-20 finance ministers also discussed how to deliver funding to developing countries to help them tackle climate change.

"We committed to take action to tackle the threat of climate change and work towards an ambitious outcome in Copenhagen," the statement said, while promising to "take forward" work on climate funding.

"We have not reached a common solution," said German Finance Minister Wolfgang Schaeuble, who added the Copenhagen summit cannot fail.

rb/AFP/dpa

Editor: Clare Atkinson