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World leaders are lining up behind a bold pledge by rich nations to cut budget deficits in half by 2013 despite President Barack Obama's concerns that cutting stimulus spending too quickly could hurt the global recovery.
Canadian Prime Minister Stephen Harper, host of a summit of the world's 20 top industrial and developing nations, said at Sunday's session that it's "imperative that we get our fiscal house in order."
The deficit-cutting goal would mean cutting the red ink in half within three years and getting the total debt stabilized by 2016.
"Advanced economies have committed to fiscal plans that will at least halve deficits by 2013 and stabilize or reduce government debt-to-GDP ratios by 2016," according to a draft statement obtained by The Associated Press. The gross domestic product measures the value of all goods and services, and is considered the best gauge of economic health.
Harper told the leaders that countries need to walk a "tightrope" between deficit spending this year, ensuring the fragile recovery continues, and then switching to deficit reduction programs.
The G-20 conference, which followed two days of discussions among the older Group of Eight countries, attracted protesters unhappy with economic globalization. The demonstrations turned violent on Saturday as protesters torched police cruisers, hurled bottles at police and smashed windows with baseball bats and hammers. Arrests topped 500 by Sunday.
The deficit targets that the G-20 countries were moving to adopt were outlined by Harper in a letter he sent to fellow leaders this month.
Harper's proposal stood in contrast to the priorities Obama laid out in a competing letter. Obama urged the G-20 countries to avoid the costly mistake made during the 1930s, when countries reduced government support too quickly and ended up prolonging the Great Depression.
But in the discussions in Canada, it was clear that Obama's view was in the minority as country after country stressed the need to reduce deficits.
Many nations are worried about the example of Greece, which fell into a financial crisis this year when financial markets became convinced that it was about to default on its government debt.
"There's also a risk that the failure to implement (budget) consolidation where necessary would undermine confidence and hamper growth," according to the draft statement.
The G-20 agreement provided support for the deficit-cutting moves. Britain, for example, last week announced a tough emergency budget, raising taxes and cutting spending by levels not since World War II.
The United States ran a record deficit of $1.42 trillion last year, or 10 percent of the overall economy as measured by the GDP. Private economists expect the deficit will decline only slightly to $1.3 trillion this year, which would amount to 9 percent of GDP.
Obama's budget plan from February would cut the deficit in half by 2012, as a percentage of GDP. He's also named a commission to examine how to trim the deficit further, to 3 percent of GDP -- a level economists generally view as sustainable.
On the issue of taxing banks to pay for future bailouts, the G-20 statement stressed the responsibility of the banking sector to shoulder the cost of any repeat crisis.
"We agreed that the financial sector should make a fair and substantial contribution toward paying any burdens associated with government intervention, where they occur, to repair the financial system or fund resolution," the draft said.
Endorsement of a bank tax comes in spite of the opposition to such a tax by a number of countries including Canada, Japan and Australia.
But the draft statement provides room for a "range of policy options" that could be adopted by countries on this front, including the pursuit of a financial levy.
Britain last week announced a levy on bank profits from January 2011 to raise about $3 billion per year. France and Germany have also agreed to similar levies.
Mindful that open signs of dissension could worry financial markets, the G-20 leaders have sought during their weekend talks to minimize their differences.
French President Nicolas Sarkozy told reporters that Obama "clearly talked about the risks of debt and deficit" in the U.S.
U.S. Treasury Secretary Timothy Geithner said world leaders understood they must work together to make sure the global recovery stays on track.
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