G-20 Nations Commit to Halving Deficits

By Beacon Staff

TORONTO — President Barack Obama on Sunday welcomed an international commitment for rich countries to slash their deficits in half by 2013, despite his earlier warnings against halting stimulus spending too abruptly.

“We can’t all rush to the exits at the same time,” Obama told a news conference at the conclusion of a summit of the 20 major industrial and developing economies.

Obama also issued a warning to North Korea, saying its alleged sinking of a South Korean warship was “belligerent behavior that is unacceptable” to the international community.

“It is absolutely critical for the international community to rally behind” South Korean President Lee Myung-bak, Obama said.

Obama spoke after G-20 leaders issued a statement calling for “advanced” nations to halve their budget deficits — as a proportion of gross domestic product growth — by 2013, and to put their annual deficits on either a lower or a more stable basis by 2016.

Despite his warnings against slamming on the stimulus brakes too soon, Obama said the final summit communique was in sync with is own views that deficit reduction was important for the midterm and long term. But in the short run, he said, it is important to maintain stimulus spending in those countries that can afford it.

“Some countries, Greece being the most obvious example, have to act immediately” to lessen the risk of defaulting on their debt obligations, Obama said. But other countries have to decide how much flexibility they have to both encourage growth and job creation without going too much deeper into debt.

“The point is, in each country, what we have to recognize is that the recovery is still fragile,” Obama said.

But if financial markets are skittish and don’t have confidence in a country’s fiscal soundness, “then that is also going to undermine our recovery.”

Obama was asked about the prospects of his Supreme Court nominee Elena Kagan, whose confirmation hearings begin Monday before the Senate Judiciary Committee. He said his former Senate colleagues “should pay attention to Elena Kagan’s record and her testimony … and then vote their conscience.”

He called objections to Kagan raised by Republicans “pretty thin gruel.”

Asked about a five-year Afghanistan exit strategy endorsed Saturday by the Group of Eight major industrial democracies, Obama cited “an obsession about when do we leave.”

He said there remains “a vital national interest that Afghanistan not be used as a base to launch terrorist attacks.” He would not commit to a firm timetable for U.S. withdrawal. “I don’t have a crystal ball,” he said.

Obama said it’s not a simple choice between getting up and leaving immediately or staying indefinitely.

He said the United States will not “suddenly turn off the lights and let the door close behind us.”

Obama emphasized the importance of China carrying through on its pledge to introduce more flexibility in how it manages its currency, the yuan.

“A strong and durable recovery also requires countries not having an undue advantage,” he said. “As I told (Chinese) President Hu Jintao yesterday, the United States welcomes China’s decision to allow its currency to appreciate in response to market forces. We will be watching very closely in the months ahead.”

The G-20 communique did not mention China’s currency directly, only generally expressing a need for countries to have flexible currency exchange rates. It did not take China to task for its managed currency policies, which American manufacturers blame for the loss of millions of jobs because they keep the cost of China-made products artificially low.

Asked about the timing for China to increase the yuan’s value, Obama said that as more market forces come to bear, he believed the Chinese currency “is going to go up significantly.”

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