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G20 Pledges to Use All Policy Tools to Support Growth

G20 Pledges to Use All Policy Tools to Support GrowthG20 Pledges to Use All Policy Tools to Support Growth

Global finance officials promised Sunday to protect the world economy from the shockwaves of Britain's European Union referendum and to boost sluggish growth.

Envoys of the Group of 20 major economies also rejected trade protectionism, an issue that has risen in prominence as US Republic presidential candidate Donald Trump stirs unease with talk about restricting access to American markets, AP reported.

The gathering of finance ministers and central bank governors from the United States, China, Britain, Germany and other governments took place against a backdrop of a weak global recovery that was rattled by Britain's vote to leave the EU and trade tension over Chinese exports of low-priced steel.

The British vote "increased global economic uncertainty," said a joint statement by the officials, who were meeting in Chengdu in western China.

"G-20 members are ready to actively respond to the potential economic and financial impact brought by the British referendum," said the statement. "In the future, we hope to see Britain as a close partner of the EU."

Sunday's statement promised to use "any and all policy instruments" to achieve "strong, sustainable, balanced and inclusive growth objectives." The governments promised to strengthen communication and cooperation but announced no joint action, as some financial traders had hoped.

"The benefits of growth need to be shared more broadly within and among countries to promote inclusiveness," the G20 officials said in a communique.

"We underscore the role of open trade policies and a strong and secure global trading system in promoting inclusive global economic growth, and we will make further efforts to revitalize global trade and lift investment," the G20 said.

The statement also called for a "close partnership" between Britain and its European neighbors in the event British leaders go through with plans to leave the trade bloc.

On Friday, the director-general of the International Monetary Fund Christine Lagarde called for quick action to end uncertainty about the British-EU split. She said that turmoil prompted the IMF to cut its forecast of this year's global growth by 0.1 percentage points.

Fiscal Space

The world's leading economies have discussed how to take advantage of their lower debt costs to spend more on investment as a way to boost weak economic growth, the head of the Organization for Economic Cooperation and Development said.

"Already lower interest rates create more fiscal space," OECD Secretary General Angel Gurria told Reuters on Sunday on the sidelines of the meeting.

"The average cost of debt takes some time to show the full impact of interest rates because it's not only (over) six months, it's over several years."

The G20 is trying to find new ways to inject more energy into the world economy after extraordinary measures by central banks, which have cut interest rates close to zero, or below in some cases, produced only lackluster growth.

The focus has turned more squarely to what governments can do through increased spending and reforms to make their economies more efficient.

China, Japan and Britain have already started easing their fiscal stance or hinted at plans to do so.

However, high levels of public debt in many countries represent a limit on big increases in spending.

"We're talking about creation of fiscal space. Basically this translates into room for maneuver to undertake certain investments that could be strategic in certain sectors," he said.

Financialtribune.com