G20
Obama urges G20 nations to maintain stimulus
President Obama signaled on Friday that countries in Europe should not withdraw their extraordinary spending programs too quickly.
In a public letter to other leaders of the Group of 20 nations in advance of a summit in Toronto next week, Mr. Obama wrote, "our highest priority in Toronto must be to safeguard and strengthen the recovery."
Mr. Obama also wrote, "we must be flexible in adjusting the pace of consolidation and learn from the consequential mistakes of the past when stimulus was too quickly withdrawn and resulted in renewed economic hardships and recession."
That statement represented a signal to Germany and other European countries, which have moved in recent weeks to pare spending, mindful of the wrenching consequences of excessive public debts in Greece, Portugal and Spain.
The United States is trying to pare its own massive deficits: Mr. Obama reiterated a pledge to cut the deficit, now about 10 percent of gross domestic product, in half by the 2013 fiscal year, and to 3 percent of G.D.P. by the 2015 fiscal year, a level he said would "stabilize the debt-to-G.D.P. ratio at an acceptable level" by then.
But American officials are concerned that fiscal retrenchment by too many countries at once could imperil the global recovery.
Mr. Obama warned of the risks of a double-dip recession, which most economists consider unlikely but not impossible.
"In fact, should confidence in the strength of our recoveries diminish, we should be prepared to respond again as quickly and as forcefully as needed to avoid a slowdown in economic activity," he wrote.
The G-20 leaders’ summit in Toronto marks a critical turning point for the group, which was convened in the final months of President George W. Bush’s administration to respond to the worldwide economic meltdown.
At subsequent meetings in London and Pittsburgh last year, the G-20 agreed to increase government spending, reform their financial systems, work toward more balanced global growth, and avoid protectionist trade measures.
Balanced growth refers in the first instance to the large external surplus enjoyed by China, whose economy has grown enormously but remains strongly reliant on foreign consumers. Even as Chinese incomes have risen, workers there have continued to save instead of spend, in large part because the social safety net has frayed.
While trying not to appear as pressuring the Chinese, the Americans have urged China to develop domestic consumption, in part by allowing the renminbi to appreciate, which would give Chinese consumers more spending power.
Mr. Obama also repeated his support for free-market currency exchange rates, a signal that China should let its currency, the renminbi, strengthen.
The letter did not mention countries or regions by name, but the implications of its language were clear. Mr. Obama wrote that "market-determined exchange rates are essential to global economic vitality" — a signal to the Chinese, who have been accused of holding down the value of the renminbi to stimulate their export-oriented economy.
Anger in Congress has been mounting over China’s currency, trade and industrial policies. At the same time, many economists doubt that China will move to let its currency appreciate right away, because the recent decline in the value of the euro has effectively caused the renminbi to gain in value.
(Published by The New York Times – June 18, 2010)