Co-operation key to recovery for G20 leaders

FINANCE ministers and central bankers from the world's leading economies yesterday agreed on the need to co-operate over fending off financial market turmoil and keeping the world economic recovery on track.

In a statement that will serve as an outline for talks later this month by national leaders, including Prime Minister David Cameron and US President Barack Obama, the Group of 20 (G20) endorsed rescue policies for Europe and the need to rebalance growth by supporting more domestic demand and greater trade by developing countries.

The agreement included no major new initiatives, but went some way to bridging differences over details of far-reaching financial reforms with calls to step up regulatory changes and cut back on budget deficits.

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"The recent volatility in financial markets reminds us that significant challenges remain and underscores the importance of international cooperation," the statement said. Countries must "put in place credible, growth-friendly measures, to deliver fiscal sustainability," it said, noting that the policies would have to fit each country's unique situation.

Despite the statement, however, talks among G20 leaders later this month are still expected to be characterised by disagreements over several key policies, in particular the International Monetary Fund's proposal for a new bank levy.

Nevertheless, yesterday's statement showed willing to cooperate over the European sovereign debt crisis. There are concerns that the crisis could spark a second downturn similar to the meltdown that gripped economies following the collapse of Lehman Brothers in 2008.

Hungary admitted on Friday that it was the latest European country facing problems in addition to Greece, Spain and Portugal, prompting the euro to fall below $1.20 for the first time in more than four years while in London the FTSE closed down 1.6 per cent at 5,126 points.