LONDON (Reuters) – Leaders of the world’s richest nations are likely to say next week that they are not content with progress so far in fixing their economies after the financial crisis.
A draft copy of the communique being prepared for leaders at a Group of Eight summit, which was obtained by Reuters, said actions by policymakers in the United States, the euro zone and Japan had reduced risks to the global economy.
“While countries have taken steps to avoid the worst of the tail risks that faced the world economy in 2012, many of these vulnerabilities remain with us in 2013, highlighting the need for countries to press ahead with the necessary reforms to restore sustainable growth and jobs,” the draft stated.
The communique was dated May 21 and is likely to have undergone revisions by the time it is put to leaders at the annual G8 summit in Northern Ireland on Monday and Tuesday, not least since the Federal Reserve has prompted a bout of market turmoil since then by warning it could slow the pace of its money-printing exercise.
The draft praised the shock measures taken by Japan’s central bank to end two decades of stagnation.
“Japan’s decisive moves to reflate its economy will support growth in the near term, but it will need to manage the twin challenge of providing near-term stimulus and achieving longer-term sustainability,” it said.
Risks in the euro zone had abated but the banking crisis in Cyprus earlier this year highlighted the scale of the challenge which remained for the single-currency area, it said.
“The U.S. recovery is gaining pace but the U.S. will still see a sizeable fiscal consolidation in 2013 and uncertainty remains around the debt ceiling and a medium-term fiscal consolidation plan,” the draft said.
The document, drawn up by the British government as host of the summit, included some explicit support for action by central banks to support economic growth, echoing the views of Britain’s finance minister George Osborne.
“Monetary activism must continue to play an important role in supporting the recovery, while ensuring medium-term inflation expectations remain anchored,” the draft said.
Such language is unlikely to make it into the final version of the communique, given the concerns held by Germany and others about the risks of central bank stimulus fuelling inflation in the future.
(Reporting by Tom Bergin. Writing by William Schomberg, editing by Mike Peacock)