Custodian of the Two Holy Mosques holds consultations with G20 leaders on financial conditions

King Abdullah addresses G20 summit on Saudi Arabia’s measures to face global financial crisis

G20 enhances unified position to back growth, agrees on need lower budget deficits

G20 still concerned over return to recession

U.S. President Obama says group managed to achieve stability of global economy but still there are challenges ahead need to be dealt with

G20 leaders closed in on a deal to slash national deficits within three years on Sunday, seeking to overcome divisions among world powers on how best to nurture a fragile global economic recovery.

The heads of the world’s major industrialized powers agreed to adopt what they dubbed "growth-friendly deficit reduction" proposals, but applied on a country-by-country basis, bowing to concerns from emerging nations.

"Recent events highlight the importance of sustainable public finances," said a draft final summit statement obtained by AFP.

In the document, leaders promise to put in place "plans to deliver fiscal sustainability, differentiated for and tailored to national circumstances."

The deal will mark a minor triumph for European leaders, led by German Chancellor Angela Merkel, who have pushed to rein in ballooning debt despite fears from the United States that it would stifle fledgling growth.

Merkel stressed, however, that the deal, which also includes a plan for nations to stabilize or reduce government debt-to-GDP ratios by 2016, would only apply to the most developed industrialized nations.

"This is an important common goal that will lead to sustainable growth," she told reporters. "We as Europeans can say that our path has found support.

"The timetable to cut deficits in half till 2013 is clearly an exit strategy," Merkel continued, adding it was a "very ambitious" plan reached after discussions with the United States.

Signs emerged late Saturday at the start of two-day G20 summit in downtown Toronto that America, the world's top economy despite its 1.3-trillion-dollar deficit, was prepared to go along with proposals to halve public debt by 2013.

US President Barack Obama told British Prime Minister David Cameron that despite "differentiated responses" to the financial meltdown, "we're aiming at the same direction: long-term sustainable growth."

Britain, along with France and Germany, have already led moves to slash back record public deficits.

But Brazil warned Europe's plans to radically cut government spending would hurt emerging economies, comments echoed by UN chief Ban Ki-moon.

"If the cuts take place in advanced countries it is worse, because instead of stimulating growth they pay more attention to fiscal adjustments," said Brazilian Finance Minister Guido Mantega.

Ban also warned the G20 working dinner that the challenge facing the group had changed from when it last came together in Pittsburgh in September.

"Let me emphasize this evening that, under any circumstances we must not balance budgets on the backs of the world’s poorest people," he said.

Canadian officials who first floated the three-year debt reduction timetable acknowledged it was a challenge to win everyone over to their side.

"Nobody said agreeing specific targets was going to be easy," Canadian government spokesman Dimitri Soudas acknowledged early Sunday.

If a deal is reached "it will be the first time that G20 leaders will have specific agreements... that will set out a path towards fiscal consolidation," he stressed.

The G20 talks opened late Saturday on the heels of a G8 summit, ringed by tight security that has seen some 20,000 police deployed around Toronto.

Violence flared Saturday on the fringes of a large demonstration, with police saying they had arrested 480 people, some of whom had been charged.

While G8 leaders acknowledged in their final statement Saturday that economic recovery remained "fragile," they focused more on international security issues.

The leaders of Britain, Canada, France, Germany, Italy, Japan, Russia and the United States demanded Iran reveal the extent of its nuclear program in transparent talks.

They also condemned North Korea's alleged torpedo attack on a South Korean warship and urged Afghanistan to boost efforts to take charge of its security.

Still concerned about slipping back into recession, world leaders signaled they have a new fear — that the deficit spending they used to stimulate growth could produce a crippling debt crisis that also could stagger the world economy.

They pledged to cut deficits in half within three years, their fear of debt outweighing warnings from President Barack Obama that cutting back too quickly risks starving the economy just as it’s starting to recover.

The leaders of the world’s top 20 economies left wiggle room for each country to chart its own belt tightening course. But they left little doubt they want to start scaling back as rapidly as possible the deficit spending they used to stimulate a recession-stricken economy.

“Here is the tightrope we must walk,” said Canadian Prime Minister Stephen Harper, who pushed the deficit cutting goal. “To sustain the recovery, it is imperative we follow through on existing stimulus plans. At the same time, advanced countries must send a clear message that as our stimulus plans expire, we will focus on getting our fiscal houses in order.”

Obama noted the goal of cutting deficits, but tempered his support for that goal with a caution that growth and job creation must come first.

“In the United States, I’ve set a goal of cutting our deficit in half by 2013. A number of our European partners are making difficult decisions,” he said. “But we must recognize that our fiscal health tomorrow will rest in no small measure on our ability to create jobs and growth today. ...we can’t all rush to the exits at the same time.”

The group’s final statement said stimulus spending, along with financial regulations, helped to bring the world back from the deepest recession since the 1930s.

“Our efforts to date have borne good results,” said the group, which represents 85 percent of the world’s economy. “Unprecedented and globally coordinated fiscal and monetary stimulus is playing a major role in helping to restore private demand and lending.”

It added, though, that the world has not yet fully recovered, and still needs help.

“Serious challenges remain,” the leaders said. “While growth is returning, the recovery is uneven and fragile, unemployment in many countries remains at unacceptable levels, and the social impact of the crisis is still widely felt.”

At the same time, they signaled that the recent debt crisis in Greece was a reminder of the dangers of excessive deficits and debt.

“Recent events highlight the importance of sustainable public finances and the need for our countries to put in place credible, properly phased and growth-friendly plans to deliver fiscal sustainability, differentiated for and tailored to national circumstances,” the group said.

Specifically, the group recommended cutting deficits in half by 2013 as measured as a share of the economy, and then stabilizing deficits at the lower levels by 2016.

European deficit hawks applauded the pact.

“Honestly, this is more than I expected, because it is quite specific,” said German Chancellor Angela Merkel. “It’s a success that industrialized countries as a group accepted this.”

Germany, along with France and the United Kingdom, announced austerity plans in recent days aimed at curbing deficits by cutting spending and raising taxes.

The Obama administration insisted the deficit target is not a problem for the United States, saying the government already proposes deep cuts in the deficit.

Obama’s proposed budget would cut the deficit from roughly $1.5 trillion this year to $724 billion in 2014.

As a share of the total economy, the deficit would drop from about 10.3 percent to 4 percent by 2014.

That’s enough to meet the G20 goal.

But the U.S. deficit would start rising again immediately after that, according to the non-partisan Congressional Budget Office. That’s driven Obama to ask a bipartisan commission to recommend ways to bring the deficit down more.

Obama’s warning about premature deficit reduction was aimed at Europe, not the United States.

The White House suggested the final agreement left enough room for Europe and other countries to adapt their budgets if necessary.

“They agreed to carry through with their existing plans to support recovery,” the White House said in a statement, “and that the fiscal consolidation necessary to restore sustainable public finances over time needs to be calibrated to protect the recovery and tailored to national circumstances.”

Meanwhile, the Custodian of the Two Holy Mosques, King Abdullah Ibn Abdulaziz Al Saud highlighted the success of G20 Summit in its response to the global financial crisis, including the measures taken to make the world avoid falling into recession; but the fragile global economic conditions prompted the postponement of the announcement of success.

'It is important that global growth should be stronger and more balanced and sustainable through the adoption of coordinated actions by the countries of the Group and simultaneously taking into account the needs and circumstances of each country,' the King said.

Addressing G20 Summit in Toronto, Canada on Sunday evening, the King expressed his thanks to the Canadian government for its efforts in preparation and organization of the Summit, affirming the importance of this meeting, which comes after Pittsburgh meeting in which a decision was made that this group is the major forum for international economic cooperation. This decision comes in line with developments on the world economy map, and in response to the need for a more representative group of the economies of developed and developing countries alike.

On the financial systems, the King emphasized the importance of their reform for avoiding the world economy with similar crises in the future, noting that the application of strong supervisory and control systems is considered more appropriate alternative than the imposition of taxes on financial institutions.

The King noted that the ability of the financial system in Saudi Arabia has been strengthened in its withstanding over the past years - thanks to strict procedures and proactive controls. 'The banking system has maintained safety of its conditions, levels of profitability and high capitals even in the wake of recent global crisis,' the King said.

'The Kingdom of Saudi Arabia has taken a number of actions in fiscal and monetary policies to counter the global financial and economic crises,' the King pointed out.

'In the area of public finance, the Kingdom continued its investment program in both public and oil sectors with a total expenditure of $400 billion, the amount which was announced earlier in Washington. This amount of expenditure is the largest stimulus package announced by the Group's member states as a percentage of Gross Domestic Product (GDP); the program is being implemented as planned. This is in addition to increasing the capital of finance institutions to be able to provide additional funding for the private sector, especially large enterprises and small and medium Corporates.

The Kingdom has also taken several actions in the field of monetary policy, financial sector and trade. These measures have helped in reducing the impact of global financial crisis and help in enhancing the performance of the Saudi economy,' the King said.

With regard to oil market developments, the King stressed that the fluctuation in oil prices which the world witnessed in 2008 and 2009, caused damage to the producing as well as consuming countries. Therefore, it should be for consuming countries to regulate stronger and effective financial and commodity markets. For its part, the Kingdom continued to apply its balanced oil policy to contribute to the stability of oil markets, also the kingdom has increased its production capacity to 12.5 million barrels per day.

The King demanded consuming countries to cooperate with the producing countries in order to ensure market stability, security of demand and supplies in order to ensure the flow of investments required in energy production. It is important to enhance the capabilities of poor countries' access to energy through the adoption of policies and practical programs to implement the initiative of energy for the poor.

The promotion of access to sources of clean and diverse energy that is reliable and affordable is essential to achieve sustainable growth and development. Our approach to support clean technologies should not include a bias or prejudice against oil and other fossil fuels.'

The King reiterated the importance of supporting developing countries, particularly those affected by the crisis. 'The Kingdom has done its utmost to help the poor countries and mitigate the global crisis on these countries by increasing bilateral and multilateral development and humanitarian assistances and also supporting and enhancing the resources of the regional and multilateral development banks,' the King said.

He welcomed the progress made on issues of reform of the voting rights and the capital in the International Bank for Reconstruction and Development (IBRD) as well as IMF (International Monetary Fund) reforms. The king stressed the importance of addressing the reform proposals as an integrated package.

With regard to international trade issues, the King stressed that the continued recovery in world trade is a necessary requirement to contribute to accelerate the pace of global growth, and this requires to avoid protectionism and to take appropriate measures to support the business-associated funding.

In this context, the King called on developed countries to address support for the products that poor countries have comparative advantage of.

'In line with Saudi Arabia's commitment to free trade, it continues its efforts to support trade liberalization initiatives at all levels. The Kingdom continues to provide funding for the purposes of trade through a number of programs and funds at national and regional levels,' the King said.

It worth mentioning that the Saudi delegation to the summit include Prince Saud Al Faisal, the Minister of Foreign Affairs, Dr. Ibrahim Al-Assaf, the Minister of Finance and Dr. Mohammed Al Jasser, the Governor of The Saudi Arabian Monetary Agency (SAMA).

King Abdullah left Toronto after a visit to Canada during which he participated in the G20 Summit.

At Pearson International Airport, the King was seen off by Saudi Ambassador to Canada Osama bin Ahmed Sanoussi and high ranking Canadian officials.