Darling urges commitment to fiscal stimulus

Alistair Darling was today urging the world's leading economies to make an "explicit commitment" that they stood ready to use further fiscal stimulus measures if they proved necessary.

Ahead of talks with fellow G20 finance ministers and central bank governors, the Chancellor warned that failure to take co-ordinated action risked worsening the recession.

His comments appeared at odds with the emphasis of Germany and France, however, who have suggested that the focus now should be on regulatory reform rather than "spending even more".

Today's G20 gathering in Horsham, West Sussex, is intended to lay the foundations for a concerted approach before the same countries' heads of government meet in London next month.

Prime Minister Gordon Brown, who will chair the London Summit, has his sights set on a "global new deal" to get the world economy back to growth and prevent similar crises in future.

Speaking to BBC Radio 4's Today programme Mr Darling said: "We are not saying to a single country, here is the five things you have got to do.

"What we are saying is you have to make your judgment in relation to what's happening in your own country as to what you support and to what extent you support it.

"What I'm looking for and I hope others are looking for too, is an explicit commitment.

"The world is looking to see what the world as a whole can collectively sign up to, to take action that will make a difference to restoring confidence."

He was not prescribing particular actions to individual countries, he stressed, but indicated he was talking about similar fiscal stimulus to that which Britain, the US, Germany, France, Japan and China have already given their economies.

"The point of the meeting is to get a commitment that countries at this time will not hold back if it's necessary to put more money into the economy."

Asked whether the Treasury would need to take further fiscal stimulus action to lift the economy out of recession, he said he would have to make a decision closer to next month's Budget.

He went on: "One of the central bank governors said to us (at a meeting last night), at a time like this, when you are facing similar conditions that governments did in the 1930s, for goodness' sake don't hold back.

"Do whatever is necessary because if you don't tackle this head on, substantially and with a great deal of resolve and determination, then the situation will be worse, as we saw in the 1930s."

Mr Darling said failure to agree co-ordinated action in 1933 meant the 1930s' recession went on for years when it "need not have done so".

Mr Brown was today meeting the German Chancellor Angela Merkel, who has fuelled talk of a rift ahead of the summit.

Germany and France combined this week to speak out against the co-ordinated fiscal stimulus which Mr Brown and US President Barack Obama see as a vital part of any rescue package.

At a joint press conference with French President Nicolas Sarkozy, Ms Merkel said: "The issue is not spending even more but to put in place a regulatory system to prevent the economic catastrophe that the world is experiencing from being repeated."

Paris and Berlin are among several European capitals thought to be nervous over US Treasury Secretary Tim Geithner's call for a stimulus in the form of tax cuts worth 2% of GDP to boost demand.

Further issues to be addressed by today's gathering would include overhauling financial regulatory systems as well as supporting emerging economies from the effects of the recession, Mr Darling said.