14 Mar 2009

The G20 question: to spend or not to spend?

7:33 pm on 14 March 2009

Finance ministers from the G20 group of countries gathered in Britain on Saturday amid disagreements between Europe and the United States over how to tackle the global economic downturn.

The ministers will be joined by heads of central banks to consider how governments should respond.

While the United States, the world's biggest economy, wants a coordinated international spending stimulus, most of Europe is suspicious of such a move and favours regulating financial markets and institutions more stringently.

In a boost for the US, Japan and China - the world's second and third largest economic powerhouses - also embraced stimulus on Friday. Japanese premier Taro Aso has ordered a new stimulus package worth a reported $US200 billion.

Senior US officials, including presidential economic adviser Larry Summers, have recently said that leading nations must try to jumpstart a global recovery by pumping more money into their economies.

But that has not been welcomed in Europe, where many leaders do not want more spending amid big budget deficits. "We do not think much of the idea of a new package of measures," German Chancellor Angela Merkel said on Friday.

The finance ministers' meeting, at a luxury hotel outside London, will prepare the ground for the economic summit of the G20 leaders in Britain next month.