TORONTO // World leaders closed in last night on a deal to cut budget deficits in half by 2013. The deal aims to narrow divisions among world powers on how best to nurture a fragile global economy amid concerns that cutting stimulus spending too quickly could hurt the recovery. Stephen Harper, the Canadian prime minister and host of the G20 summit of leading industrial and developing nations, said it was "imperative that we get our fiscal house in order".
The leaders agreed to "growth-friendly deficit reduction" proposals that would stabilise the total debt by 2016. The proposals would be applied on a country-by-country basis, bowing to concerns from emerging nations. "Advanced economies have committed to fiscal plans that will at least halve deficits by 2013 and stabilise or reduce government debt-to-GDP ratios by 2016," according to a draft statement.
The G20 have also appear to have agreed to give countries a choice on whether to levy a tax on banks in order to recoup bailout costs. Mr Harper told the leaders that countries need to walk a "tightrope" between deficit spending this year, ensuring the fragile recovery continues, and then switching to deficit reduction programmes. The G20 conference, which followed two days of discussions among the older Group of Eight countries, attracted protesters unhappy with economic globalisation. The demonstrations turned violent on Saturday as protesters torched police cars, hurled bottles at police and smashed windows with baseball bats and hammers. By last night, the number of arrests had reached 500.
The deficit targets that the G20 countries were moving to adopt were outlined by Mr Harper in a letter he sent to fellow leaders this month. Mr Harper's proposal stood in contrast to the priorities the US president Barack Obama laid out in a competing letter. Mr Obama urged the G20 countries to avoid the costly mistake made during the 1930s, when countries reduced government support too quickly and ended up prolonging the Great Depression. But in the discussions, it was clear that Mr Obama's view was in the minority.
Many nations are worried about the example of Greece, which fell into a financial crisis this year when financial markets became convinced that it was about to default on its government debt. * With reporting by Agence France-Presse and Associated Press