By Steven K. Beckner

WASHINGTON (MNI) – Group of 20 policymakers Friday declared that,
although the global recovery has proven stronger than expected, some
unspecified countries should continue to stimulate their economies.

The G-20, in a communique, said that all nations should develop
“credible exit strategies,” but emphasized those plans should be
“tailored” to the needs of individual nations. At the same time, it said
policies need to be “coordinated.”

The G-20, which includes the Group of Seven industrial nations plus
other important countries, such as Brazil, China, India, South Korea and
Russia, endorsed a “Framework for Strong, Sustainable and Balanced
Growth,” which among other things called for eliminating “output and
employment gaps” in G20 counties and returning economies to their
“potential.”

The communique also called for continued action on financial
reform.

Unlike past G7 statements, the G-20 communique makes no mention of
currencies or exchange rates and does not specify what individual
nations should do. Nor is there any mention of debt-laden Greece, which
announced earlier Friday that it intends to draw upon lines of credit
previously offered by the European Union and the International Monetary
Fund.

Treasury Secretary Timothy Geithner and Federal Reserve Chairman
Ben Bernanke and their G-20 counterparts agreed that “the global
recovery has progressed better than previously anticipated largely due
to the G-20’s unprecedented and concerted policy effort.”

“However, it is proceeding at different speeds within and across
regions, and unemployment is still high in many economies,” they said.

“We recognize that in such circumstances different policy responses
are required,” the G-20 finance ministers and central bankers continued.
“In economies where growth is still highly dependent on policy support
and consistent with sustainable public finances, it should be maintained
until the recovery is firmly driven by the private sector and becomes
more entrenched.”

The communique notes that “some countries are already exiting” from
anti-crisis and anti-recession measures, but adds, “We should all
elaborate credible exit strategies from extraordinary macroeconomic and
financial support measures that are tailored to individual country
circumstances while taking into account any spillovers.”

“We emphasized the necessity to pursue well coordinated economic
policies that are consistent with sound public finances; price
stability; stable, efficient and resilient financial systems; employment
creation; and poverty reduction,” the officials went on.

The communique says that “countries who have the capacity should
expand domestic sources of growth” and says that “would help cushion a
decline in demand from countries that should boost savings and reduce
fiscal deficits.”

The communique does not identify which countries need to keep
pro-growth policies in place and which countries can afford to provide
more stimulus.

Attached to the communique is “framework” for “balanced growth,”
which it calls a “key mechanism through which we will continue to work
together to address the challenges associated with achieving a durable
recovery and our shared objectives.”

The framework states that “the objectives of strong, sustainable
and balanced growth are closely related and need to be pursued in a way
that is mutually reinforcing.” And it provides some broad parameters or
“principles.”

First, it says “strong growth should:

“a. Close current output and employment gaps in G20 countries as
soon as possible,

“b. Converge to the growth rate of potential output over the medium
term, and

“c. Be enhanced over the long term by increasing potential output
growth, primarily by efficiently utilizing available resources through
the implementation of more effective structural policies.”

The framework says “sustainable growth should be:

“a. In line with underlying potential growth over the medium term,
thereby providing a firm basis for long term growth,

“b. Based on sustainable public finances and price and financial
stability,

“c. Resilient to economic and financial shocks,

“d. Determined primarily by competitive market forces, and

“e. Consistent with social and environmental policy goals.”

And the framework says “balanced growth should:

“a. Be broadly based across all G20 countries and regions of the
world,

“b. Not generate persistent and destabilizing internal or external
imbalances, and

“c. Consistent with broad development goals, in particular,
convergence to high standards of living across countries in the long
run.”

The communique says the G-20 nations, along with the International
Monetary Fund and World Bank, have conducted the initial phase of a
“cooperative and consultative mutual assessment process for the
Framework by sharing our national and regional policy frameworks,
programs and projections, assessing their collective consistency with
our objectives, and producing a forward-looking assessment of global
economic prospects.”

“We further provided guidance to the IMF, and other international
organizations, to assist us in assessing collective implications of
national policies that could improve our global economic prospects and
bring us closer to our shared objectives,” the communique says.

The framework principles, it says, will be used to “direct the
development of alternative policy scenarios and have further elaborated
the objectives of strong, sustainable and balanced growth.”

The G-20 policymakers pledged to deliver an initial set of policy
options for consideration by G-20 leaders at their June Summit in
Toronto.

Moving beyond the economy, the G-20 “reaffirmed (their) strong
commitment to fully implement our reform agenda on the timelines agreed
by Leaders in London and Pittsburgh.”

They said “good progress is being made,” but to “maintain the
momentum” they reaffirmed that “reform is multi-faceted but at its core
must be stronger capital standards, complemented by clear incentives to
mitigate excessive risk-taking practices.”

They also “recommitted to developing by end-2010 internationally
agreed rules to improve both the quantity and quality of bank capital
and to discourage excessive leverage,” to be “phased in as financial
conditions improve and economic recovery is assured, with the aim of
implementation by end-2012.”

The G-20 agreed to “support the work of the (Financial Stability
Board) to develop prudential standards, market infrastructures to
contain the propagation of shocks and resolution tools and frameworks
for systemically important financial institutions and look forward to a
progress report for our meeting in June 2010.”

“We look forward to receiving the IMF’s final report on the range
of options that countries have adopted or are considering as to how the
financial sector could make a fair and substantial contribution towards
paying for any burdens associated with government interventions to
repair the banking system,” they further stated.

And they called on the IMF for “further work on options to ensure
domestic financial institutions bear the burden of any extraordinary
government interventions where they occur, address their excessive risk
taking and help promote a level playing field, taking into consideration
individual country’s circumstances.”

The G-20 also “stressed the importance of achieving a single set of
high quality, global accounting standards; implementing international
standards with regard to compensation practices and welcomed the FSB’s
report; completing the development of standards for central clearing and
trading on exchanges or electronic platforms of all standardized
over-the-counter derivative contracts, where appropriate, and reporting
to trade repositories of all over-the-counter derivative contracts; and
consistent and coordinated oversight of hedge funds and credit rating
agencies.”

** Market News International Washington Bureau: 202-371-2121 **

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