G20 finance ministers are preparing to ease the pace of their budget cuts and tax rises so as not to pull the rug from under the global economy.
"We will ensure the pace of fiscal consolidation is appropriate to support growth," said a draft communiqué released at the G20 meeting in Mexico City yesterday. In Toronto, in 2010, G20 nations agreed to halve their budget deficits by the end of 2013.
But the global economy has stuttered since then and the International Monetary Fund has urged the world's largest economies to refrain from excessive consolidation so as to support growth.
The G20 message, however, is directed mainly at the United States, which will push through automatic cuts equivalent to 4 per cent of GDP starting next year unless the Houses of Congress can agree a compromise on medium-term tax rises and spending cuts. The communiqué said the US "will carefully calibrate the pace of fiscal tightening".