Cameron signs G20 economy recovery plan

Britain today joined forces with five other G20 countries to call for decisive and coordinated action from the world's leading nations to help the global economy recover from recession.

Prime Minister David Cameron put his name to a letter to current G20 president France - also signed by the leaders of Australia, Canada, Indonesia, Mexico and South Korea - warning that the path out of recession will be "difficult" and arguing that the world's biggest economies must agree at the Cannes Summit in November to work together to increase global demand without creating unsustainable imbalances.

The six signatories, who do not include the US or any eurozone state, urged swift action to resolve the debt crisis in the single currency area and for measures from Washington to put America's public finances on a sustainable path.

South Africa was involved in discussions about the letter and is understood to share many of the concerns voiced in it, but decided at a late stage that it was not ready to sign up.

"For many advanced economies the path out of the deep and prolonged recession will be difficult," warned the letter, addressed to French President Nicolas Sarkozy.

"This will impact on growth in emerging markets, and there is more limited room for manoeuvre than in 2009."

Mr Sarkozy said yesterday that the Cannes Summit should be used to help the world find a path back to economic growth.

Today's letter backed his call and argued that this will require G20 leaders to act together in a coordinated way to address the issues which relate to their own countries - whether in reducing debt, tackling trade imbalances or strengthening banking systems.

Barriers to progress on restoring growth are now political as much as economic, said the letter.

Cannes will provide an opportunity for G20 members - who together represent 85% of the world economy - to "commit to each other to take the actions we know are necessary".

Three years after the G20 leaders first met to discuss the global financial crisis in 2008, its "reverberations" are still being felt around the world, said the letter.

"We need decisive action to support growth, confidence, and credibility," the signatories warned.

"We have not yet mastered the challenges of the crisis. Global imbalances are rising again. External risks to the stability of our banks and our economies are reaching pre-crisis levels. And volatile and high energy prices are hurting our citizens and acting as a drain on world growth.

"At the same time, the confidence of citizens, businesses, and markets has been damaged due to the lack of visible political will: this in itself is holding back the recovery."

In a plea for a return to the kind of coordinated action seen at the height of the crisis in 2008/09, they warned: "Only when we work together can we restore strong growth and the confidence on which it depends."

The letter called for eurozone governments and institutions to "act swiftly to resolve the euro crisis" by tackling debt and swiftly ratifying the bailout mechanism agreed in July.

And it called on the US and other high-deficit advanced economies, to "overcome the remaining hurdles towards restoring medium-term fiscal sustainability".

"Countries with long-term debt problems must put in place and implement credible growth-friendly medium-term fiscal consolidation plans, differentiated according to each country's own national circumstances," said the letter.

Meanwhile, it urged countries with large trade surpluses - such as China - to expand domestic demand, keep their markets open, increase exchange rate flexibility and refrain from competitive devaluation.

And it called for the completion of the Doha talks on trade liberalisation, which have dragged on for more than a decade. If a "credible plan" to conclude Doha cannot be reached at Cannes, G20 nations should move to alternative approaches for strengthening the multilateral trade system.

"The barriers to action are now political as much as economic," said the letter, released ahead of a meeting of G20 finance ministers in Washington DC this weekend.

"We must send a clear signal that we are ready to take the actions necessary to maintain growth and stability for all for the future.

"The G20 showed at the height of the global financial crisis that we could work together to deal with global instability - the Cannes Summit is an opportunity for leaders to prove this, arrest the slide in confidence, and strengthen the foundations for strong, sustainable, and balanced global growth for the future."

Mr Cameron said every country in the world had to "face up to the problems".

In an interview with Channel 4 News, the Prime Minister said: "Well, I think what needs to happen is every country has got to face up to its own problems and difficulties and deal with them, whether that is debts in the Eurozone, whether it is problems in banks, whether it's dealing with our deficits - every country has to do that.

"And that's why I've come together with leaders of countries in the G20 but as diverse as Mexico, Canada, Australia, South Korea and signed a letter to President Sarkozy, who's leading the G20 this year, to make exactly that point - face up to the debts, face up to the deficits, face up to the problems.

"Every country in the world has got to do that in a co-ordinated way so we can get growth moving."

PA