G20 sets growth priority to boost fragile recovery

The G20 on Saturday agreed to make boosting growth and jobs, rather than deficit reduction, the short-term priority for the global economy as it battles to consolidate a "fragile and uneven" recovery. Finance chiefs from the G20 group of advanced and emerging nations, after meeting in Moscow, also backed an action plan drawn up by the OECD to crack down on tax avoidance by multinationals to help replenish budgets diminished by the slowdown. The finance ministers and central bank governors agreed that the Saint Petersburg summit in September of G20 heads of state -- the culmination of Russia's presidency of the group -- should produce an action plan to improve productivity and employment. "We agreed that our near-term priority is to boost jobs and growth," said their final communique. "The global economy remains too weak and its recovery is still fragile and uneven," the statement said. "We are fully committed to taking decisive actions to return to a robust, job-rich growth path." The G20 said that while the United States and Japan showed signs of strengthening activity, the recession in the euro area was continuing and growth in many emerging markets was slowing. The statement said jobs could be boosted by reducing financial market fragmentation, rebalancing global demand, and taking measures to support growth. All G20 governments are acutely aware of the fragility of their recoveries from the global slowdown, with some eurozone countries now battling youth unemployment of 60 percent. The IMF earlier this month cut its forecast for global growth to 3.1 percent in 2013, down from its April estimate of 3.3 percent, and warned that emerging markets like China face new risks. The United States has emerged in better shape than other key economies, and the US Federal Reserve is already considering cutting its quantitative easing programme -- which injects some $85 billion a month into the economy via bond purchases -- later this year and end the programme by mid-2014. However this has concerned several big economies, including Russia and Brazil, which fear their own fragile recoveries could be hit by any sudden about-turn in US policy. In response to these concerns, the statement vowed that any changes to monetary stimulus packages would be "carefully calibrated and clearly communicated". The United States made clear that the fight against unemployment should be at the top of the agenda although other states, like Germany, are known for wanting to keep a strict eye on fiscal discipline. However a senior US treasury official said that while previous meetings had wrestled with this dispute, this time there was general agreement that boosting demand was the priority. The real issue at stake is combatting very high unemployment and demand which is well below pre-crisis levels, said the official, who asked not to be named. French Finance Minister Pierre Moscovici agreed that while there were still divisions on the need for fiscal consolidation, the differences were considerably less sharp than before. "Yes, budget consolidation is necessary in the medium term but in the short term we have absolutely to put the emphasis on growth," he said. IMF managing director Christine Lagarde said: "It's clearly on the mind of everybody to restore confidence and to create the conditions for growth and for employment." The economic fragility appears to have also helped unite the G20 in a fight against tax avoidance -- technically legal schemes which allow multinationals to pay very low tax -- as well as illegal tax evasion. Companies like Amazon and Starbucks have been in the spotlight in recent months over tax avoidance. The G20 said they had "fully endorsed" the action plan delivered earlier in the two-day meeting by the Organisation for Economic Cooperation and Development (OECD) to clamp down on tax avoidance. "We encourage all interested countries to participate," it said. However the communique stopped short of giving a deadline for the action plan to be implemented. The OECD had previously said the plan could be implemented by next year.