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November 9, 2009

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G-20 vows to keep stimulus but no climate change deal

FINANCE officials from rich and developing countries have pledged to maintain emergency support for their economies until recovery is assured, but failed to reach a clear agreement to bear the cost of fighting climate change.

There was also a mixed reaction among the Group of 20 leading rich and emerging nations on Saturday to a British-led push to consider a fund for bank bailouts, possibly financed by a tax on financial transactions, to ensure that taxpayers don't bear the brunt of any future rescues.

The grouping - representing about 90 percent of the world's wealth, 80 percent of world trade and two-thirds of the world's population - said in a statement after talks in St Andrews, Scotland, that economic recovery is "uneven and remains dependent on policy support."

United States Treasury Secretary Timothy Geithner said US jobs figures out last Friday showing unemployment at a 26-year high of 10.2 percent "reinforced that this is still a very tough economic environment."

While the "process of growth is now beginning," that fledging growth still needs to be reinforced to create jobs and get businesses investing to underpin the recovery in the housing market and elsewhere, Geithner said.

"If we put the brakes on too quickly, we will weaken the economy and the financial system, unemployment will rise, more businesses will fail, budget deficits will rise, and the ultimate cost of the crisis will be greater," Geithner told reporters after the talks. "It is too early to start to lean against recovery."

The statement smoothed over divisions among G-20 nations about whether it was time to start talking about exit strategies to unwind recent massive stimulus measures. Germany, France and Russia have called for a joint plan on when countries should start repaying debt, and the European Central Bank has said it will soon start withdrawing some of its emergency lending to banks.

On climate change, the G-20 officials also said they wanted "an ambitious outcome" at a major UN conference in Copenhagen next month - but did not commit to a funding package to help poorer nations adapt to a warming climate.

European nations have promoted a global climate fund of some 100 billion euros (US$148 billion) a year by 2020 - combining government and private finance - as an incentive for poor developing nations to agree to tight curbs on greenhouse gas emissions.

Swedish Finance Minister Anders Borg, whose country holds the rotating European Union presidency, said no deal on financing would mean that "we will end up with a very difficult situation in Copenhagen."

There was also little traction for British Prime Minister Gordon Brown's call for urgent consideration of a global fund to rescue troubled banks, possibly financed by a tax on financial transactions. Brown said such a measure was necessary because "it cannot be acceptable that the benefits of success in this sector are reaped by the few but the costs of its failure are borne by all of us."


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