German Finance Minister Wolfgang Schaeuble said that economic growth should take priority over deficit reduction for now.
A gathering of G-20 finance chiefs that ended in Moscow today sent “an important signal, namely that we all agree that the most important task is to strengthen growth and create jobs,” Schaeuble told reporters after the meeting. “Global growth is moderate and the recovery is fragile.”
Bundesbank President Jens Weidmann, who spoke alongside Schaeuble at the briefing, said the picture of the world economy has “clouded over” and the euro region only managed to stabilize recently after a protracted economic downturn. Any improvement this year will be gradual, he said.
Germany came under fire from countries including the U.S. and South Korea, who pressed Europe to prioritize growth over cutting debt. The finance ministers and central bank governors today laid the ground for G-20 leaders to decide on fiscal strategies when they meet in St. Petersburg in September. Those must be “sufficiently flexible to take into account near-term economic conditions” while also making debt levels more sustainable, the G-20 said in a statement published today.
Germany had sought agreement on tougher language today that would require medium-term budget targets, said an official from a G-20 country.
G-20 leaders will discuss country-specific targets for the time after 2016 in St. Petersburg, though the group has yet to decide if these would be binding, said a second official who asked not to be named because the talks aren’t public.
“The concrete figures will only be published at the summit, this is for the heads of state and government to do,” Schaeuble said of the debt targets. A 2012 G-20 agreement to draw up country-specific goals “remains important.”
Schaeuble said “healthy, sustainable public finances” are a necessary ingredient for jobs growth in Europe. Japan must complement the current fiscal and monetary policy expansion through “structural reforms and a credible consolidation strategy” while the U.S. needs “a medium and long-term consolidation strategy” in addition to the short-term measures already taken, he said.
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