US warns over recession risks as G20 meeting starts

Protesters set at least two police patrol cars alight in Toronto

The US has said the world's largest economies should focus on maintaining growth to avoid a double-dip recession.

As the G20 summit begins in Canada, US Treasury Secretary Timothy Geithner said Europe and Japan should boost domestic demand instead of cutting spending.

European leaders have said reducing government deficits is key to setting long-term growth on track.

But Brazil warned that steep budget cuts could harm emerging economies.

Speaking in Toronto, scene of the summit, Mr Geithner said the global economy was still emerging from its crisis and "the scars of this crisis are still with us".

He said: "This summit must be fundamentally about growth."

Cut or spend?

Emergency assistance that G20 leaders agreed on at previous summits at the height of the economic crisis must not be withdrawn too soon, he said.

Protest ahead of Toronto summit, 25 June

"We're going to avoid that mistake by making sure that we recognize that it's only been a year since the world economy stopped collapsing," he said.

Europe and Japan should do more to stimulate domestic demand to make it easier for other countries to export to them.

With countries emerging from the global downturn at different speeds, splits have emerged in how to proceed.

Spooked by attacks on the euro currency prompted by Greece's debt crisis, European governments have focused on cutting spending to reduce their deficits.

A draft version of the summit's communique suggested the Group of 20 richest and emerging economies was nearing a compromise, Reuters news agency said.

This would see an agreement to halve budget deficits by three years and toughen banking regulations.

Brazil said the focus on cutting deficits could harm emerging economies.

"If the cuts take place in advanced countries it is worse," said Brazilian Finance Minister Guido Mantega.

"Because instead of stimulating growth they pay more attention to fiscal adjustments, and if they are exporters they will be reforming at our cost."

North Korea warning

Thousands of demonstrators marched on the G20 summit on Saturday in what is being reported to have been a largely peacefully rally that saw outbreaks of violence on its edges. These saw groups of young men scuffle with riot police and set fire to at least two patrol cars.

STEPHANOMICS

Start Quote

The argument over the right way to support the global recovery here at the G20 summit in Toronto is the mirror image of the debate at the London Summit last year”

End Quote Stephanie Flanders

The G20 meeting follows the summit of the G8 group of industrialised nations, which met at a lakeside resort outside Toronto.

They condemned North Korea for the sinking of a South Korean warship in March.

The G8 leaders also criticised North Korea - and Iran - over their nuclear activities, and they described the Israeli blockade of the Gaza Strip as "not sustainable".

And they admitted that the global financial crisis had compromised efforts to meet UN targets for reducing world poverty.

On Friday, they agreed to donate $5bn (£3.3bn) over five years towards improving the health of mothers and young children in the developing world.

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