MercoPress. South Atlantic News Agency

G20 ministers and bankers pledged to put growth before austerity

Finance Minister Siluanov ”some people thought that first you need to ensure economic growth”.

The Group of 20 nations pledged to put growth before austerity, seeking to revive a global economy that “remains too weak” and adjusting stimulus policies with care so that recovery is not derailed by volatile financial markets.

Finance ministers and central bankers signed off on a communiqué that acknowledged the benefits of expansive policies in the United States and Japan but highlighted the recession in the euro zone and a slowdown in emerging markets.

“While our policy actions have contributed to contain downside risks, those still remain elevated,” the statement said. “There has been an increase in financial market volatility and a tightening of conditions.

Indications that the US Federal Reserve would scale back its monetary stimulus dominated the two-day talks in Moscow, with emerging markets most concerned by a resulting sell-off in stocks and bonds, and a flight to the dollar.

Hosts Russia said G20 policymakers had soft-pedalled on goals to cut government debt in favour of a focus on growth and how to exit central bank stimulus with a minimum of turmoil.

”(G20) colleagues have not made the decision to take responsibility to lower the deficits and debts by 2016,“ Finance Minister Anton Siluanov told reporters. ”Some people thought that first you need to ensure economic growth.

While the US recovery is gaining traction, China's export motor is sputtering, Japan's bid to break out of deflation has not reached escape velocity, and demand in the Euro zone is too weak to sustain a job-creating recovery.

Officials backed an action plan to boost jobs and growth, while rebalancing global demand and debt, which will be readied for a G20 leaders’ summit hosted by President Vladimir Putin in September.

“We remain mindful of the risks and unintended negative side effects of extended periods of monetary easing,” the statement said. “Future changes to monetary policy settings will continue to be carefully calibrated and clearly communicated.”

In return for its pledge to 'message' its monetary policy intentions clearly, Washington managed to ensure that the text contained no binding fiscal targets, saying that consolidation should be “calibrated” to economic conditions.

The G20 accounts for 90% of the world economy and two-thirds of its population - many living in the large emerging economies at greatest risk of a reversal of capital inflows that have been one of the side effects of the Fed stimulus.