UK Cameron : Global Economic Threats Demand G-20 Resolve, Commitment
06/17/2012| 07:16pm US/Eastern
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By Nicholas Winning
LOS CABOS, Mexico--The Group of 20 industrial and developing nations must show leadership and come to grips with the five biggest threats to the world economy: the euro-zone crisis, high sovereign debt, weak growth and competitiveness, protectionism, and the failure to regulate the banking system, U.K. Prime Minister David Cameron will say Monday.
"There can be no room for timidity in meeting these threats. No ducking the essential action on fiscal discipline, monetary activism, and structural reform," he will say, according to the text of a speech he is due to make at an event on the margins of a summit of G-20 leaders.
On the euro-zone crisis, the issue that is likely to dominate the two-day meeting in the Mexican resort, member states need to make some difficult decisions if the single currency area is to stay together, he will say.
Mr. Cameron has urged the euro zone to solve the problems of Greece, strengthen its banks, build a sufficiently strong firewall to protect countries from the fallout of the crisis, and carry out structural reforms to improve competitiveness.
On the subject of debt, the prime minister will say the G-20 must send an unequivocal message that deficit reduction and growth aren't alternatives. Countries burdened with debt and vulnerable to market instability simply can't afford to shy away from reducing those debts, Mr. Cameron will say.
"If a country wants growth in its national economy, then it has to deal with its debts," he will say. "Countries cannot continue to run indefinite structural fiscal deficits without contributing to the fundamental imbalances that fuelled the 2008 crisis in the first place."
Where countries lack the fiscal space to stimulate their economies, the most powerful tools available are monetary activism and structural reform, he will say.
The U.K. government has introduced several measures to use its low borrowing rates to try to boost credit to pull its economy out of recession while simultaneously pushing through tough austerity measures to reduce the size of its budget deficit.
Mr. Cameron will say it is becoming increasingly clear that the core countries in the euro zone and the European Central Bank must do more to support demand and share the burden of adjustment in the single-currency area.
"In short, we cannot afford for central banks around the world to stand on the sidelines if we are to deliver the growth we need," he will add.
On the subject of trade, Mr. Cameron will say there is growing evidence that countries are resorting to protectionist measures--with 124 new trade restrictions being introduced over the last eight months.
"It's more important than ever that we all honour the commitment made by every country at every G-20 [nation] to stop and reverse the rise of protectionism across the world," he will say.
Worsening economic conditions also mustn't be used as an excuse for countries to drag their feet on properly regulating their financial sectors. Six G-20 countries haven't yet fully brought forward plans to implement the Basel III banking reforms, he said, without specifying which.
"Banks need certainty so they can get on with lending to business. So we need a clear timetable for us all to implement the commitments we have made. And we need the FSB [Financial Stability Board] to be frank and fearless in their assessment of where we are," he will say.
Write to Nicholas Winning nick.winning@dowjones.com.
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