World leaders aim on cutting deficits by 2013

G20 leaders yesterday closed in on a deal to slash national deficits within three years, aiming to narrow divisions among world powers on how best to nurture a fragile global economic recovery.

The heads of the world's major industrialised powers agreed to what they dubbed "growth-friendly deficit reduction" proposals, to be applied on a country-by-country basis, bowing to concerns from emerging nations.

Canadian Prime Minister Stephen Harper told his G20 counterparts there was a "tightrope that we must walk to sustain recovery", adding, "It is imperative we follow through on existing stimulus plans.

"But, at the same time, advanced countries must send a clear message that as our stimulus plans expire, we will focus on getting our fiscal houses in order," he insisted.

A draft of the final G20 communique stressed "the importance of sustainable public finances" by halving deficits by 2013.

The leaders promise to put in place "plans to deliver fiscal sustainability, differentiated for and tailored to national circumstances", it added.

The deal will mark a minor triumph for European leaders, led by German Chancellor Angela Merkel, who have pushed to rein in ballooning debt despite fears from the United States that this could stifle fledgling growth.

Mrs Merkel stressed, however, that the deal, which also includes a plan for nations to stabilise or reduce government debt-to-GDP ratios by 2016, would only apply to the most developed industrialised nations.

"This is an important common goal that will lead to sustainable growth," she told reporters. "We as Europeans can say that our path has found support.

"The timetable to cut deficits in half by 2013 is clearly an exit strategy," Mrs Merkel continued, adding it was a "very ambitious" plan reached after discussions with the United States.

Signs emerged late on Saturday at the start of a two-day G20 summit in downtown Toronto that the US, the world's top economy saddled with a huge $1.3-trillion deficit, was prepared to go along with the plan.

US President Barack Obama told British Prime Minister David Cameron that despite "differentiated responses" to the financial meltdown, "we're aiming at the same direction: long-term sustainable growth."

Britain, along with France and Germany, have already led moves to slash back record public deficits, which have been inflated by stimulus spending to keep their economies afloat.